scholarly journals Testing the Ricardian Equivalence Theorem: Time Series Evidence from Turkey

Economies ◽  
2020 ◽  
Vol 8 (3) ◽  
pp. 69
Author(s):  
Ahmet Salih İkiz
Keyword(s):  
Government Expenditure ◽  
Equivalence Theorem ◽  
Ricardian Equivalence ◽  
Causality Test ◽  
The Future ◽  
Domestic Savings ◽  
High Government ◽  
Private Savings ◽  
The Government ◽  
Tax Cuts

Two of the most common measures adopted by the government to stimulate the economy are increasing government borrowings and implementing tax cuts. These tax cuts are financed through increased debt. According to the Ricardian equivalence theory, the consumers will not change their current spending when they anticipate a tax increase in the future. In order to pay high taxes in the future, the government should increase its present savings. However, the extent of applicability of Ricardian equivalence could vary across nations. In this context, the present study explores the long-running relationship between domestic borrowing and private savings in Turkey. For this purpose, the researcher collected the data for key variables, gross domestic savings, and government debt, for the period of 1980–2017. The researcher used unit root, cointegration, VECM, and the Granger causality test to examine the relationships among the variables. Apart from this, ARDL regression was used in order to examine the long-term relationships among the variables. The empirical results indicate that there is presence of bidirectional causality, indicating that Ricardian equivalence is applicable in the economy. Households display a rational behavior by increasing their savings during the periods in which high government expenditure is incurred.

scholarly journals Re-testing Wagner's Law: Structural breaks and disaggregated data for South Africa

2017 ◽  
Vol 9 (4(J)) ◽  
pp. 49-61
Author(s):  
Mthokozisi Mlilo ◽  
Matamela Netshikulwe
Keyword(s):  
South Africa ◽  
Structural Breaks ◽  
Government Expenditure ◽  
Active Role ◽  
Output Growth ◽  
Causality Test ◽  
Wagner’S Law ◽  
Education Expenditures ◽  
Wagner's Law ◽  
The Government

Direction of causality between government expenditure and output growth is pertinent for a developing country since a sizeable volume of economic resources is in the hands of the public sector. This paper investigates the Wagner's law in South Africa over the post-apartheid era, 1994-2015. This paper is unique to present studies since it uses disaggregated government expenditure and controls for structural breaks. The Granger non-causality test of Toda & Yamamoto, a superior technique compared to conventional Granger causality testing, is employed and this paper finds no support for Wagner's law. However, there is causality running from total government and education expenditures to output. This finding is in line with the Keynesian framework. It is recommended in the paper that the government should take an active role in promoting output growth through increases in education expenditures in particular.

PENGUJIAN WAGNER'S LAW VERSUS KEYNESIAN HYPOTHESIS: PENDEKATAN REGIONAL INDONESIA

2021 ◽  
Vol 2 (2) ◽  
pp. 181-193
Author(s):  
Esti Pasaribu ◽  
Septriani Septriani
Keyword(s):  
Government Expenditure ◽  
Granger Causality Test ◽  
Empirical Theory ◽  
Causality Test ◽  
Wagner’S Law ◽  
Long Run ◽  
Wagner's Law ◽  
The Government ◽  
The Relationship ◽  
Positive Effect

In this paper, we tested the Wagner’s Law against the Keynesian Hypothesis for Indonesia using granger causality test. After conducting theoretical and empirical theory, this paper is analysing the relationship between government expenditure and GDP percapita. The long run parameters and causality test found valid Wagners’ Law in Indonesia not Keynesian Hypothesis. The results reveal a positive and statistically significant long run effect running from economic growth toward the government expenditure refer to Wagner’s Law in Indonesia. Further more, the growth of population is giving a positive effect for government expenditure also.

scholarly journals Effect of Exchange Rate Fluctuation and Foreign Reserves on Macroeconomic Performance in Nigeria

2021 ◽  
Vol 04 (10) ◽  
Author(s):  
Nkire Nneamaka Loretta ◽  
Keyword(s):  
Exchange Rate ◽  
Government Expenditure ◽  
External Debt ◽  
Macroeconomic Performance ◽  
Foreign Reserves ◽  
Causality Test ◽  
Exchange Rate Fluctuation ◽  
Rate Fluctuation ◽  
The Exchange Rate ◽  
The Government

This study examines the effect of Exchange Rate Fluctuation and Foreign Reserves on Macroeconomics Performance in Nigeria from 1980-2019. The variables of interest include External Debt, Reserves, Exchange Rate, External Debt Servicing and Government Expenditure were analyzed using co-integration, auto-redistribution lag model (ARDL) and Granger Causality test to understand the long and short run relationship between the variables. Result revealed that there is a unidirectional relationship between foreign reserves and the exchange rate. Exchange rate Granger causes foreign reserves in Nigeria, while foreign reserves do not granger cause exchange rate Granger. This means that as the exchange rate depreciates or appreciates, it always has an impact on Nigeria's foreign reserves. The study recommends among other thing that the government should ensure that the country's foreign reserves are used and managed efficiently. This is because it has been established that foreign reserves have a beneficial impact on macroeconomic performance and stimulate economic growth both of which help to enhance the Nigerian economy.

scholarly journals Re-testing Wagner’s Law: Structural breaks and disaggregated data for South Africa

2017 ◽  
Vol 9 (4) ◽  
pp. 49
Author(s):  
Mthokozisi Mlilo ◽  
Matamela Netshikulwe
Keyword(s):  
South Africa ◽  
Structural Breaks ◽  
Government Expenditure ◽  
Active Role ◽  
Output Growth ◽  
Causality Test ◽  
Wagner’S Law ◽  
Education Expenditures ◽  
Wagner's Law ◽  
The Government

Direction of causality between government expenditure and output growth is pertinent for a developing country since a sizeable volume of economic resources is in the hands of the public sector. This paper investigates the Wagner's law in South Africa over the post-apartheid era, 1994-2015. This paper is unique to present studies since it uses disaggregated government expenditure and controls for structural breaks. The Granger non-causality test of Toda & Yamamoto, a superior technique compared to conventional Granger causality testing, is employed and this paper finds no support for Wagner's law. However, there is causality running from total government and education expenditures to output. This finding is in line with the Keynesian framework. It is recommended in the paper that the government should take an active role in promoting output growth through increases in education expenditures in particular.

The Impact of Fiscal and Monetary Policy Imbalances on the UK Economy

2004 ◽  
Vol 189 ◽  
pp. 61-63 ◽  
Author(s):  
Ray Barrell ◽  
Rebecca Riley
Keyword(s):  
Government Expenditure ◽  
The Public ◽  
Current Consumption ◽  
State Of The Economy ◽  
High Government ◽  
Government Deficit ◽  
The Government ◽  
The Uk ◽  
The Impact ◽  
Fiscal And Monetary Policy

Government expenditure has been rising rapidly as a proportion of GDP in recent years, and has risen from 39.5 per cent in 2002 to 40.9 per cent in 2003 and 2004 and is anticipated to rise to 41.5 per cent in 2005. Around two thirds of this increase in spending is projected to be on current consumption, whilst one third is on net investment. Between the first and the last of these fiscal years we project that the government deficit, as defined by Public Sector Net Borrowing, will have also increased by 1 per cent of GDP. During that period we expect that the output gap will have closed, and hence the deterioration in the public finances must be seen as a consequence of the policy actions of the Government and not as a result of the economic cycle. These policy actions will have contributed to the current unbalanced state of the economy, where we have strong growth and high government borrowing along with a poor and deteriorating current account.

scholarly journals One Decade, 20 Percent Education Budget: How About Causality Between Education Success and Poverty?

2021 ◽  
pp. 173
Author(s):  
Putu Yudy Wijaya ◽  
Nyoman Reni Suasih
Keyword(s):  
Poverty Alleviation ◽  
Government Expenditure ◽  
Secondary Data ◽  
Poor People ◽  
Government Budget ◽  
Causality Test ◽  
Analysis Technique ◽  
The Mean ◽  
The Government ◽  
Years Of Schooling

In 2019, exactly one decade of the government expenditure on education in Indonesia (central and local government) was allocated 20 percent. The purpose of this study was to analyze the causality relationship between government budget on education, education success (proxied by the mean years of schooling), and poverty (proxied by the number of poor people) in Indonesia. The data analyzed is secondary data, to be precise panel data from 34 provinces in Indonesia over a period of five years (2015-2019). The analysis technique used is the Granger Causality Test. The results showed that the government budget on education had a significant effect on the mean years of schooling and had a causal relationship with poverty. Meanwhile, poverty has been shown to affect the mean years of schooling. Based on the results of this analysis, it is for the government to consistently prioritize the budget for the education sector because it is proven to have an impact on education success and poverty alleviation. In addition, the government also needs to pursue poverty alleviation programs such as subsidizing cash assistance for student in poverty.

scholarly journals Ricardian Equivalence revisited: introductory notes

2022 ◽  
Vol 42 (1) ◽  
pp. 113-127
Author(s):  
Maria Isabel Busato
Keyword(s):  
Interest Rate ◽  
Public Debt ◽  
Real Interest Rate ◽  
Final Section ◽  
Government Expenditure ◽  
Equivalence Theorem ◽  
Ricardian Equivalence ◽  
Real Effect ◽  
The Real ◽  
Tax Reduction

ABSTRACT These notes aim to revisit the debate, the model, the results, and main objections to the validity of the Ricardian Equivalence Theorem as presented in Barro (1974). It is intended to explore his thesis that tax and debt are equivalent and have no real effect on perceived wealth, demand, the real interest rate or on the economy. The thesis refers to the analysis of the ways of financing debt at a given level of government expenditure and does not address the effects of an expansion of this volume of spending, nor it specifically analyzes the effects of an increase in public debt due to a tax reduction policy. After this presentation, the thesis is debated, consolidating some of the premises that are necessary to validate it. The purpose of the paper is to explore the first round of debates on the theme, explaining the restrictions to which the Barro-Ricardo Theorem or the Ricardian Equivalence Theorem is subject, based on the publications by Barro (1976), Buchanan (1976) and Feldstein (1976), all of them within the ‘realm’ of economic orthodoxy. The final section presents some remarks and an analysis of Barro’s later work (1989 and 1996).

scholarly journals Nexus Between Public Finance and Economic Growth in Nigeria

2020 ◽  
Vol 17 ◽  
Keyword(s):  
Public Finance ◽  
Economic Growth ◽  
Capital Expenditure ◽  
Government Expenditure ◽  
Unit Root Test ◽  
Secondary Data ◽  
Major Effect ◽  
Public Expenditures ◽  
Domestic Savings ◽  
The Government

Public finance deals with various roles and activities of the government aimed at ensuring economic growth. This study assessed the nexus between public finance and economic growth in Nigeria. It adopts the theory of Peacock; it states that a country could evolve after encountering social disturbances. Such financial difficulties are expected to increase government spending leading to national growth. Secondary data sources gotten from CBN and World Development Indicators are used. Data analysis is done using Unit Root test, Auto-Regressive Distributed Lag (ARDL) and granger causality technique for period 1981 to 2017. Results of the study indicate that Government revenue (GREV) has a major effect on development of Nigeria’s economy, Government expenditure (GEXP) has not substantially but significantly impacted economic growth via the outcomes of Recurrent expenditure(REXP) and capital expenditure (CEXP), and in conclusion Gross domestic savings (GDS) has not impacted Nigeria's economic growth. The recommendation made based on the findings are; In order to ensure aggregate productive public expenditures, the government of Nigeria should ensure that the composition of public sector outputs is optimal. This can be done by ensuring it does not produce either too much of one good or too little of another,the government of Nigeria through various investment schemes and programs that are tax exempt can promote the practice of saving in the country. Investing in such saving schemes can considerable promote individuals tax savings which in turn increases gross domestic savings.

scholarly journals Oczekiwania i decyzje gospodarstw domowych oraz przedsiębiorstw a makroekonomiczne konsekwencje polityki gospodarczej

2016 ◽  
pp. 29-48
Author(s):  
Marcin Krawczyk
Keyword(s):  
Phillips Curve ◽  
Equivalence Theorem ◽  
Theoretical Framework ◽  
Ricardian Equivalence ◽  
Demand For Money ◽  
The Future ◽  
Business Entities ◽  
Macroeconomic Aggregates

The paper describes different approaches in the theory of economics (from Phillips curve through ricardian equivalence theorem to the demand for money) to the expectations of business entities on the future shape of basic macroeconomic aggregates. Inclusion of such expectations in theoretical framework of economics changes described economic processes and leads to change in the conclusions. 

scholarly journals Contribution of agriculture sector to national economy in Nepal

2015 ◽  
Vol 16 ◽  
pp. 180-187 ◽  
Author(s):  
Santosh Adhikari
Keyword(s):  
Foreign Direct Investment ◽  
Gross Domestic Product ◽  
National Economy ◽  
Direct Investment ◽  
Government Expenditure ◽  
Domestic Product ◽  
Annual Growth Rate ◽  
Compound Annual Growth Rate ◽  
Domestic Savings ◽  
The Government

Agriculture is the mainstay of majority of Nepalese people which provides employment, foods and shelter. However, the investment in agriculture in not encouraging, received only about 3 percent of total government outlays during 2002 to 2014. In the study, Gross Domestic Product was regressed with Domestic Savings, Government Expenditure on Agriculture and Foreign Direct Investment on Agriculture with the data from FY 2002/03 to 2014/15. Regression reveals the degree of association among these variables is significant at 5 % level of significance (R=0.991, P=0.005<0.05). The analysis showed that the contribution of Government Expenditure on Agriculture to Gross Domestic Product was found significant whereas the Domestic Savings and Foreign Direct Investment on Agriculture were found insignificant. The compound annual growth rate of Government’s expenditure was found slightly lower than that of budget allocated to Ministry of Agricultural Development. In sum, the study concluded that the Government Expenditure on Agriculture is crucial for the national economy.

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