SINTESI DI PATRIZIA MARGANI, ROBERTO RICCIUTI

 

WP N. 59

 

 

RICARDIAN EQUIVALENCE IN OPEN ECONOMY: A DYNAMIC PANEL ANALYSIS

 

ABSTRACT

 

We analyse Ricardian Equivalence in open economy using a panel of 18 developed countries for 1973-1998. We use a dynamic panel estimated via instrumental variables and we discuss why this specification should be preferred to a static model estimated via ordinary least squares. We find a significant effect of the budget balance on the current account, mostly in its current value, suggesting that Ricardian Equivalence does not hold.

 

 

 

Keywords: Ricardian Equivalence, fiscal policy, dynamic panel models

 

JEL Classification: F32, F41, E62, H62