Gadjah Mada International Journal of Business
Vol 10, No 2 (2008): May - August

Testing of the Ricardian Equivalence proposition: An Empirical Examination for Malaysia (1962-2006)

Ismail, Ismadi ( Faculty Business and Management, Universiti Teknologi MARA, Malacca Campus, 78000 Alor Gajah, Melaka)
Ismail, Abdul Ghafar ( Islamic Economics and Finance Research Center (EKONIS) and Chairman Shari’ah Committee, Citibank Berhad.)
Amiruddin, Rosilawati ( aculty Business and Management, Universiti Teknologi MARA, Malacca Campus, 78000 Alor Gajah, Melaka.)



Article Info

Publish Date
12 Jun 2008

Abstract

This paper investigates the effects of debts and budgetary deficit on real variables using structural Vector Error Correction Model (VECM) method with long-run restrictions. We compare our estimates of the impulse responses with those based on levels Vector Auto-Regressive (VAR) with standard recursive order restrictions. The test is conducted on the Malaysian data covering the period of 1962-2006. The empirical results do not support the existence of “Ricardian Equivalence” hypothesis. The effects of budgetary deficit and government spending have a significant influence on private consumption and private investment.

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Journal Info

Abbrev

GAMAIJB

Publisher

Subject

Economics, Econometrics & Finance

Description

Gadjah Mada International Journal of Business (GamaIJB) is a peer-reviewed journal published three times a year (January-April, May-August, and September-December) by Master of Management Program, Faculty of Economics and Business, Universitas Gadjah Mada. GamaIJB is intended to be the journal for ...