THE EFFECT OF PUBLIC DEBT ON PRIVATE CONSUMPTION: AN APPLIED STUDY ON EGYPT
Keywords:
Government Debt, Interest Payments, Ricardian Equivalence, ARDL ModelAbstract
The problem of public debt has become one of complicated problems that cannot be overlooked in most countries of the world, especially developing countries, when they trying to bridge the gap between their revenues, which seems to be modesty, and expenditures, which are linked to ambitious plans for investment and development, and despite economic schools division between supporters and opponents of the public debt impact on the economy, and on the burden of this debt, but it can be said that the dilemma of public debt cannot be solved effortlessly due to its direct and indirect effects. This study focused on the impact of public debt on private consumption during the period from 1991 to 2019. The study found that the domestic public debt negatively affects households consumption, but it has a slight and limited impact, and the consumption of the family sector is elastic to income, and this seems normal in low income developing countries, and therefore the response of household consumption to the change in income is high, family consumption is associated with an inverse relationship with both public debt, taxes, and a direct relationship with the income growth rate, and there is a significant relationship between public debt and the inflation rate with lag periods, However, it is affected by income and taxes without any lag periods.
References
Barro, R. J. (1996). Reflections on Ricardian equivalence.
Berben, R. P., & Brosens, T. (2007). The impact of government debt on private consumption in OECD countries. Economics Letters, 94(2), 220-225.
Bernheim, B. D. (1987). Ricardian equivalence: An evaluation of theory and evidence. NBER macroeconomics annual, 2, 263-304.
Buchanan, J. M. (1976). Barro on the Ricardian equivalence theorem. Journal of political economy, 84(2), 337-342
Cho, D., & Rhee, D. E. (2013). Nonlinear effects of government debt on private consumption: Evidence from OECD countries. Economics Letters, 121(3), 504-507.
Giorgioni, G., & Holden, K. (2003). Does the Ricardian Equivalence Proposition Hold in Less Developed Countries? International Review of Applied Economics, 17(2), 209–221.
Gogas, P., Plakandaras, V., & Papadimitriou, T. (2014). Public debt and private consumption in OECD countries. The Journal of Economic Asymmetries, 11, 1-7.
Hakes, D. R., & McCormick, K. (1996). Did Smith Address Ricardian Equivalence before Ricardo?. Eastern economic journal, 22(1), 57-61.
Khan, H. H. A., Abdullah, H., & Samsudin, S. (2016). The linkages between household consumption and household debt composition in Malaysia. International Journal of Economics and Financial Issues, 6(4), 1354-1359.
Kusairi, S., Maulina, V., & Margaretha, F. (2019). Public debt and private consumption in Asia Pacific countries: Is there evidence for Ricardian equivalence?. Journal of International Studies, 12(1).
O'Driscoll Jr, G. P. (1977). The Ricardian nonequivalence theorem. Journal of Political Economy, 85(1), 207-210.
Ofori-Abebrese, G., & Pickson, R. B. (2018). Ricardian Equivalence Hypothesis in the Sub-Sahara African Countries. Journal of Economic Integration, 33(3), 466–487.
Ricciuti, R. (2003). Assessing Ricardian equivalence. Journal of Economic Surveys, 17(1), 55-78.
Seater, J. J. (1982). Are future taxes discounted?. Journal of Money, Credit and Banking, 14(3), 376-389.
Seater, J. J. (1985). Does government debt matter? A review. Journal of Monetary Economics, 16(1), 121-131.
Seater, J. J. (1993). Ricardian equivalence. Journal of economic literature, 31(1), 142-190.
Sunge, R., Mufandaedza, S., & Matsvai, S. (2015). Testing the Ricardian equivalence hypothesis in Zimbabwe: An ARDL bound testing approach.
Tsoulfidis, L. (2007). Classical economists and public debt. International Review of Economics, 54, 1-12.
Tsoulfidis, L. (2010). Competing schools of economic thought. Springer Science & Business Media.
Downloads
Published
Issue
Section
License
Copyright (c) 2020 Rasha Elkordy (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
