Ricardian equivalence and the efficacy of fiscal policy in Australia

Authors

Shane Brittle, University of WollongongFollow

RIS ID

30358

Publication Details

Brittle, S. (2009). Ricardian equivalence and the efficacy of fiscal policy in Australia. Singapore Economic Review Conference 2009 (pp. 1-34). Singapore: Singapore Economic Review.

Abstract

Events surrounding the global financial and economic crises of 2008 and 2009 have sparked a renewed interest in discretionary fiscal policy. This article considers whether private saving in Australia behaves in a manner that is consistent with Ricardian equivalence, thus mitigating the effects of fiscal policy, or conversely, if fiscal policy has some ability to influence the real economy. Results indicate that, while there is not a full Ricardian response to changes in the fiscal stance, there is some partial offsetting behaviour—implying that fiscal policy does elicit some (limited) impact on economic activity.