Journal Article


Karl Whelan



tax revenues consumption government spending consumption economics mathematical models economic recovery finance public ireland irish quantitative methods ricardian equivalence ireland economic conditions private sector

Ricardian equivalence and the Irish consumption function: the evidence re-examined (1991)

Abstract The Ricardian Equivalence hypothesis states that economic agents perceive the future tax liabilities implicit in government debt issue and thus that increasing government expenditure partially crowds out private sector consumption through its effects on perceived permanent income. Thus, Ricardian equivalence implies that not only does a contraction of government expenditure provoke offsetting effects on aggregate demand but that it also leads to an increase in indirect tax revenues, thus setting in train a relatively painless cycle of debt reduction. Moore (1987) has presented results, based on tests from US literature, which he concluded provided strong evidence in favour of the hypothesis. Walsh (1988) confirmed that Moore's favoured econometric result was robust to data revisions and changes in data definition. Furthermore, Giavazzi and Pagano (1990) have discussed the notion of government spending reductions increasing private consumption to suggest a demandside explanation of Ireland's post-1987 experience of fiscal retrenchment combined with economic recovery while McAleese (1990) has referred to Moore's results in a similar context.
Collections Ireland -> University College Dublin -> School of Economics
Ireland -> University College Dublin -> College of Social Sciences and Law
Ireland -> Trinity College Dublin -> Economic and Social Review
Ireland -> University College Dublin -> Economics Research Collection
Ireland -> Trinity College Dublin -> The Economic and Social Review, Vol. 22, No. 3, April, 1991
Ireland -> Trinity College Dublin -> Economic and Social Review Archive: Complete Collection 1969-

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Karl Whelan

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Karl Whelan
University College Dublin
Total Publications: 70