How Effective Is Fiscal Policy in Raising National Saving?

37 Pages Posted: 13 Sep 2017

See all articles by Humberto Lopez

Humberto Lopez

World Bank - Research Department

Klaus Schmidt-Hebbel

Pontifical Catholic University of Chile

Luis Servén

World Bank - Development Research Group (DECRG)

Date Written: May 1, 2000

Abstract

While fiscal adjustment is commonly viewed as the cornerstone of macroeconomic stabilization, the effectiveness of alternative fiscal instruments in raising national saving is still poorly understood. This paper enters the debate by estimating a private consumption function that allows for two types of agents—finite horizons and liquidity constraints—and nests three different consumption hypotheses. Using a large-panel data set that includes both industrial and developing countries, we reject full Ricardian equivalence. We also find substantial differences between industrial and developing countries, regarding both the extent of Ricardian offsetting and the degree to which the government budget constraint is internalized.

Suggested Citation

Lopez, Humberto and Schmidt-Hebbel, Klaus and Servén, Luis, How Effective Is Fiscal Policy in Raising National Saving? (May 1, 2000). Review of Economics and Statistics, Vol. 82, No. 2, 2000. Available at SSRN: https://ssrn.com/abstract=3035604

Humberto Lopez

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Klaus Schmidt-Hebbel (Contact Author)

Pontifical Catholic University of Chile ( email )

Av. Vicuna Mackenna 4860
Santiago
Chile

Luis Servén

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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