Public Debt and Private Consumption in Asia Pacific Countries: is there Evidence for Ricardian Equivalence?

• Autorzy: Suhal Kusairi , Vinus Maulina , Farah Margaretha
• Języki publikacji: EN

Abstrakty

EN

The study analyses the effect of public debt on private consumption. It indirectly tests whether a Ricardian equivalence proposition exists in differentiated financial development for the yearly data of 18 Asia Pacific countries from 1990 to 2017 using dynamic heterogeneous panel data analysis. The results allow concluding that public debt and private consumption have a long-term co-integrated relationship, and in the general approach, Ricardian equivalence does exist in both long and short term. This implies that an increase in public debt does not increase private consumption because consumers expect governments to raise taxes to service debt such as principal and interest payments. But under the traditional approach Ricardian equivalence does not exist, thus, public debt does affect private consumption. In addition, income, capital accumulation, government expenditure, real interest rate and inflation have a positive effect on private consumption. The key implication of these results is that financial development does not provide evidence for the existence of Ricardian equivalence as it does not have a different effect for different countries. (original abstract)

Słowa kluczowe

EN

Public debt; Individual consumption; Ricardian equivalence

PL

Dług publiczny; Konsumpcja indywidualna; Równoważność ricardiańska

• Czasopismo: Journal of International Studies
• Rocznik: 2019
• Tom: 12
• Numer: nr 1
• Strony: 50--64

Twórcy

autor

Suhal Kusairi

• Universiti Malaysia Terengganu

autor

Vinus Maulina

• Universiti Malaysia Terengganu

autor

Farah Margaretha

• Universitas Trisakti

Bibliografia

• Barro, R.J. (1974). Are government bonds net wealth, Journal of Political Economy, 82, 1095-1117.
• Barro, R.J. (1978). The impact of social security on private saving, American Enterprise Institute Studies, no; 199 (Washington: American Enterprise Institute for Public Policy Research).
• Barro, R. J. (1989). The Ricardian approach to budget deficits. Journal of Economic perspectives, 3(2), 37-54.
• Becker, T. (1995). Government debt and private consumption: Theory and evidence. Economic Research Institute, Stockholm School of Economics.
• Berben, R. P., & Brosens, T. (2005). The impact of government debt on private consumption in OECD countries. De Nederlandsche Bank Working Paper. Amsterdam, Netherlands.
• Blanchard, O. J. (1985). Debt, deficits, and finite horizons. Journal of Political Economy, 93(2), 223-247.
• Coccia, M. (2017). Asymmetric paths of public debts and of general government deficits across countries within and outside the European monetary unification and economic policy of debt dissolution. The Journal of Economic Asymmetries, 15, 17-31.
• de Castro, F., & Fernández, J. L. (2013). Does ricardian equivalence hold? The relationship between public and private saving in Spain. Journal of Applied Economics, 16(2). 251-274.
• Feldstein, M. (1982). Government deficits and aggregate demand. Journal of Monetary Economics, 9, 1-20.
• Fournier, J-M and Fall, F. (2017). Limits to government debt sustainability in OECD countries. Economic Modelling xxx (xxxx) xxx-xxx.
• Ghatak, A., & Ghatak, S. (1996). Budgetary deficits and Ricardian equivalence: the case of India, 1950-1986. Journal of Public Economics, 60(2), 267-282.
• Gogas, P., Plakandaras, V., & Papadimitriou, T. (2014). Public debt and privateconsumptio in OECD countries. The Journal of Economic Asymmetries, 11, 1-7.
• Haris, A., & Mohammad, A, K. (2015). Federal government debt and private consumption: the Malaysian experience. Journal of Scientific Research and Development, 2 (12), 64-69.
• Hausman, J. (1978). Specification tests in econometrics. Econometrica, 46, 1251-1271.
• Karras, G. (1994). Government spending and private consumption: some international evidence. Journal of Money, credit and Banking, 26(1), 9-22.
• Khalid, A.M. (1996.) Ricardian equivalence: empirical evidence from developing economies. J. Develop. Econ., 51, 413-432.
• Kochin, L., (1974). Are future taxes anticipated by consumers? Comment. Journal of Money, Credit, and Banking, 6, 385-394.
• Kormendi, R. (1983). Government debt, government spending, and private sector behaviour. American Economic Review (December), 994-1010.
• Li, Shaoyu & Wei, Lijia & Xu, Zhiwei. (2017). Dynamic asset allocation and consumption under inflation inequality: The impacts of inflation experiences and expectations. Economic Modelling, 61, 113-125.
• Linnemann, L. (2006). The effect of government spending on private consumption: a puzzle?. Journal of Money, Credit, and Banking, 38(7), 1715-1735.
• Michel, P. & Thibaulth, E. (2007). The failure of Ricardian equivalence under dynastic altruism. Journal of Mathematical Economics, 43, 606-614.
• Oseni, Isiaq Olasunkanmi. (2016). Exchange rate volatility and private consumption in Sub-Saharan African countries: A system-GMM dynamic panel analysis. Future Business Journal, 2, 103-115.
• Paret, Anne-Charlotte (2017). Debt sustainability in emerging market countries: Some policy guidelines from a fan-chart approach. Economi Modelling, 63, 26-45.
• Pesaran, H. M., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group estimation of dynamic heterogenous panels. Journal of the American Statistical Association, 94, 621-634.
• Pesaran, M. H., & Smith, R. (1995). Estimating long-run relationships from dynamic heterogeneous panels. Journal of econometrics, 68(1), 79-113.
• Pettinger, T. (2009). Economics Help. Ricardian Equivalence. Access on 20 October 2016.
• Pozzi, Lorenzo (2006). Ricardian equivalence under imperfect information. Journal of Public Economics, 90, 2009- 2026.
• Prohl, S., & Schneider, F. G. (2006). Sustainability of public debt and budget deficit: Panel Cointegration analysis for the European Union member countries (No. 0610). Working Paper, Department of Economics, Johannes Kepler University of Linz.
• Reitschuler, G., (2008). Assessing Ricardian equivalence for the New Member States: Does debt-neutrality matter?. Economic Systems, 32, 119-128.
• Reiter, M., (1997). Ricardian equivalence with uninformed consumers? European Journal of Political Economy, 1, 747-758.
• Ricardo, D. (1817). On the principles of political economy and taxation, in P. Sraffa (ed.), The works and correspondence of David Ricardo, Volume I, 1951, Cambridge University Press, Cambridge.
• Seater, J. J., & Mariano, R. S. (1985). New tests of the life cycle and tax discounting hypotheses. Journal of Monetary Economics, 15(2), 195-215.
• Soon, S. V., Baharumshah, A. Z., & Shariff, N. S. M. (2017). The persistence in real interest rates: Does it solve the intertemporal consumption behavior puzzle?. Journal of International Financial Markets, Institutions and Money, 50, 36-51.

Identyfikatory

DOI

10.14254/2071-8330.2019/12-1/3