Ricardian equivalence: an
empirical application to the Portuguese economy
Carlos
Fonseca Marinheiro
(Faculty
of Economics of the
and
Katholieke Universiteit
March
2001
Abstract
It is the purpose
of this paper to focus on the consequences of the Ricardian offset to the
conduct of stabilising fiscal policies. If equivalence prevails there is no
scope for effective stabilising fiscal policies. A review of the theoretical
requirements of Ricardian equivalence reveals that they are not likely to be
fulfilled in practice. However, the brief survey of the empirical applications
shows that the published empirical evidence is inconclusive. An empirical
application for the Portuguese economy is carried out. The tests are based on
reduced-form consumption functions and on the Euler equation approach. The
overall results are ambiguous.