Another look at Ricardian equivalence: The case of the European Union

Thomas Grennes, Andris Strazds 28 February 2013

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The so-called Ricardian equivalence suggests that a government will have the same effect on private spending whether it raises taxes or takes on additional debt to finance higher government spending. The logic behind it is that as the government gets more indebted, people would put aside more money in expectation of higher taxes in the future. However, there is no consensus on the empirical validity of Ricardian equivalence (see Seater 1993 for a comprehensive review).

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Topics:  Europe's nations and regions

Tags:  Germany, Spain, UK, Greece, Eurozone crisis, Ricardian equivalence

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