Do fiscal variables affect private consumption? Evidence from Australia and the United States

Abstract

This study examines the effect of fiscal measures on real private consumption using an error correction model. On balance, the empirical results of the study provided some evidence against the Ricardian equivalence hypothesis. In particular, responses to real government consumption and taxes in the United States and responses to real government debt and transfer payments in Australia were significant with their dynamic paths moving opposite to Ricardian proposition.