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Volume 59, Issue 2

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Emerging Market Countries Don’t Believe in Fiscal Stimuli: Should We Blame Ricardo?

Bulíř, Aleš; Swiston, Andrew

Year: 2009   Volume: 59   Issue: 2   Pages: 153-164

Abstract: Emerging market countries had by early 2009 announced that they will have remained fiscally conservative during the 2008–09 crisis, at least compared with the developed countries, which announced much larger fiscal stimuli. We argue that the difference in the pre-announced fiscal stance between those two groups of countries could be at least partly due to the awareness of Ricardian equivalence, that is, a higher offset between private and public saving in emerging market countries. We find that the offset coefficient is almost twice as high in emerging market countries as in developed countries, implying that additional government spending, that is, public dissaving, would be almost completely offset by private saving.

JEL classification: E21, O54

Keywords: private saving, Ricardian equivalence, fiscal policies

RePEc: http://ideas.repec.org/a/fau/fauart/v59y2009i2p153-164.html

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