Vol. 11 No. 22 (2016)

Artículos

Private consumption and public deficit in latin america: theory and evidence of ricardian equivalence hypothesis

Published 2016-01-04

  • Michel Eduardo Betancourt-Gómez

Michel Eduardo Betancourt-Gómez
Universidad Nacional Autónoma de México, Facultad de Economía

Abstract

This brief provides a theoretical and empirical analysis of the Ricardian Equivalence Hypothesis, this argument implies the neutrality of public deficit over the individual consumption. The theoretical analysis summarizes the various controversies that this theory has generated among economists and their confrontation with the classical and Keynesian theories. The empirical analysis provides an assessment of compliance of the hypothesis for the case of 11 countries in Latin America, and is contrasted against a Keynesian consumption model. By using a panel data model, the long term  relations of the Ricardian Equivalence and Keynesian models are estimated.  It is concluded that consumers in Latin America do not take into account the  public financing way at the time of consumption.

Keywords

economic theory, public deficit, private consumption, cointegration panel, Latin America

PDF (Spanish)

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