Private Sector Consumption and Government Consumption and Debt in Advanced Economies: An Empirical Study

By Sanchita Mukherjee, Rina Bhattacharya

November 1, 2010

Preview Citation

Format: Chicago

Sanchita Mukherjee, and Rina Bhattacharya. Private Sector Consumption and Government Consumption and Debt in Advanced Economies: An Empirical Study, (USA: International Monetary Fund, 2010) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper explores the hypothesis that the propensity to consume out of income varies in a non-linear fashion with fiscal variables, and in particular with government debt per capita. Using data from eighteen OECD countries the paper examines whether there is any empirical evidence to support the hypothesis that households move from non-Ricardian to Ricardian behavior as government debt reaches high levels and as uncertainty about future taxes increases. Our results provide support for this hypothesis, and also suggest that private and government consumption are substitutes in the household utility function.

Subject: Fiscal consolidation, Government consumption, Income, Private consumption, Public debt

Keywords: Fiscal policy, WP

Publication Details

Pages:

27
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2010/264
Stock No:

WPIEA2010264
ISBN:

9781455210718
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers