Research Discussion Papers, Bank of Finland
No 28/1996:
Fiscal Policy and Private Consumption – Saving Decisions: Evidence from Finland
Anne Brunila ()
Abstract: The paper presents a theoretical model of private
consumption that emcompasses both the conventional (Keynesian) view of
fiscal policy and the Ricardian debt neutrality hypothesis. The effects of
fiscal policy on private consumption are analyzed in an extended framework
built on Blanchard's stochastic model of intertemporal optimization with
finitely lived consumers, in which private consumption depends on expected
lifetime wealth. The model also nests various hypotheses concerning the
relationship between public spending and private consumption. Empirical
analysis is based on the Finnish annual data from 1960–1995 and uses the
nonlinear instrumental variable GMM estimator. The tests cannot reject the
hypothesis that consumers are Ricardian. Moreover, the results suggest that
in the consumers' utility functions, government consumption is a substitute
for private consumption.
Keywords: private consumption; private saving; fiscal policy; planning horizon; (follow links to similar papers)
43 pages, December 18, 1996
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
DP_28_1996.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
