Testing of the Ricardian Equivalence proposition: An Empirical Examination for Malaysia (1962-2006)

  • Ismadi Ismail Universiti Teknologi MARA
  • Abdul Ghafar Ismail Citibank Berhad
  • Rosilawati Amiruddin Universiti Teknologi MARA
Keywords: debts, Ricardian equivalence, VAR, VECM

Abstract

This paper investigates the effects of debts and budgetary deficit on real variables using structural Vector Error Correction Model (VECM) method with long-run restrictions. We compare our estimates of the impulse responses with those based on levels Vector Auto-Regressive (VAR) with standard recursive order restrictions. The test is conducted on the Malaysian data covering the period of 1962-2006. The empirical results do not support the existence of “Ricardian Equivalence” hypothesis. The effects of budgetary deficit and government spending have a significant influence on private consumption and private investment.

References

-
Published
2008-05-12
How to Cite
Ismail, I., Ismail, A. G., & Amiruddin, R. (2008). Testing of the Ricardian Equivalence proposition: An Empirical Examination for Malaysia (1962-2006). Gadjah Mada International Journal of Business, 10(2), 161-184. Retrieved from https://dev.journal.ugm.ac.id/v3/gamaijb/article/view/14953
Section
Articles