IS PUBLIC DEBT NEUTRAL? EVIDENCES FOR INDONESIA

https://doi.org/10.22146/jieb.39931

Arti Adji(1*)

(1) Universitas Gadjah Mada
(*) Corresponding Author

Abstract


"Jer basuki mawa bea". There is no such thing as a free lunch. Government
like other economic agents-has to finance its expenditures, now or later. "Oikos
nomos",-Greek words from which the word economics came from is the essence of
government activities in managing its budget. The topic of this paper concerns with
the way the government finances its budget and its effects on economic activity.
Specifically, this paper is aimed to test empirically whether the Ricardian
equivalence or a public debt neutrality holds in Indonesia. The longrun analysis of an
error correction representation suggests that the timing of taxation does not matter,
implying that the government can conduct mix-finance fiscal policy. Furthermore,
test for rationality conducted in this paper shows the evidence of rational consumers
one of the assumptions underlying the Ricardian hypothesis to hold.


Keywords


Government finances, ricardian equivalence, public debt, fiscal policy

Full Text:

PDF


References

Aschauer, David Alan (1985), "Fiscal Policy and Aggre-gate Demand", The American Economic Review, March, Vol. 35, p. 1 IT-127. Barro, Robert J. (1987), Macroeconomics, John Wiley & Sons. Barro, Robert J. (1974), "Are Government Bonds Net Wealth?, Journal of Political Economy, p. 1095-1117. Barsky, Robert B., N, Gregory Mankiw, and Stephen P. Zeldes (1986), "Ricardian Consumers with Keynesians Propensities", The American Economic Review, Sept, p. 676-689. Bayoumi, Tamim (1990), "Saving-Investment Correlations, Immobile Capital, Government Policy or Endogenous Behaviour", International Monetary Fund Staff Papers, Vol. 37, No. 2, p. 360-387. Bernheim, B. Douglaas (1989), "A Neoclassical Perspective on Budget Deficits", Journal of Economic Perspectives, p. 55-72. Bohn, Henning (1992), "Endogenous Government Spending and Ricardian Equivalence", The Economic Journal, 102, May, p. 588-597. Breeder, C. Den, and C.C.A. Winder (1992), "Financing Government Spending in the Netherlands, An Analysis from Ricardian Perspective", De Economist, 140, NR, 1, p. 65-82. Carmichael, Jeffrey (1982), "On Barm's Theorem of Debt Neutrality: The Irrelevance of Net Wealth", The American Economic Review, March, Vo. 72, No. 1, p. 202-213. Domowitz, lan, and Ibrahim Elbadawi (1987), "An Error Correction Approach to Money Demand, The Case for Sudan", Journal of Development Economics, 26, p. 257-275. Dornbusch, Rudiger and Stanley Fischer (1991), Macroeconomics, McGraw-Hill Inc. Engle, Robert P., and C.W.J. Granger (1987), "Co-integration and Error Correction: Representation, Estimation, and Testing", Econo-metrica, Vol. 55, No. 2, p. 251-276. Evans, Paul (1985), "Do Large Deficit Produce High In-terest Rates?" The American Economic Review, p. 68-116. Freeman, Scott, and Bruce Champ (1994), Modelling Monetary Economics, John Wiley & Sons Inc. Fry, Maxwell J. (1991), "Longrun and Shortrun Behaviour of Korea's Current Account", manuscript, p. 1-25. Fuller, Wayne, A. (1976), Introduction to Statistical Time Series, John Wiley & Sons Inc. Granger, C.W.J. (1986), "Developments in the Studies of Cointegrated Economic Variables", Oxford Bulletin of Econometrics and Statistics, 48, 3, p. 231-228. Gujarati (1988), Basic Econometrics, McGraw-Hill Book Company. Hall, Robert J., and John B. Taylor (1988), Macroeconomics Theory, Performance, and Policy, WW Norton and Company. Haque, Nadeem U. (1988), "Fiscal Policy and Private Saving Sector Behaviour in Developing Countries", International Monetary Fund Staff Papers. Hendry, David F. 1986, "Econometric Modelling with Cointegrated Economic Variables: An Overview", Oxford Bulletin of Economics and Statistics, 48, 3. Hendry, David F, AR Pagan dan S. Sargan (1984), "Dynamic Specification", Handbook of Econometrics, p. 1023-1095, Elsevier Science Publishers BV. Hylleberg, Svend, and Gragham E. Mizon, 1989, "Cointegration and Error Correction Mechanism", The Economic Journal, 99, p. 113-125. International Financial Statistics, Yearbook 1992. International Financial Statistics, August 1993. Insukindro (1990), The Short and Long-term Determinants of Money and Bank Credit Markets in Indonesa, Ph.D. thesis, University of Essex, UK, unpublished. Insukindro (1990), "Komponen Koefisien Regresi Jangka Panjang Model Ekonomi: Sebuah Studi Kasus Impor Barang di Indonesia", Jurnal Ekonomi dan Bisnis Indonesia, No. 2 Vol V, BPFE-FE UGM, Yogyakarta, p. 1-11. Insukindro (1992), "Cointegration: Practical Application and Poblems", a paper presented in Seminar Seton, Faculty of Economics, Gadjah Mada University, Yogyakarta, Indonesia, February, 29, p. 1-21. Insukindro (1992), "Dynamic Specification of Demand for Money: A Survey of Recent Development", Jurnal Ekonomi Indonesia, p. 8 - 23. Insukindro, Wihana Kirana Jaya, and Anggito Abimanyu (1994), "Perilaku Neraca Transaksi Berjalan Indonesia: Suatu Tinjauan Analisis Runtun Waktu", manuscript, Inter Universities Centre, Gadjah Mada University, December. Kompas, March, 20, 1993. Kompas, March, 30, 1993. Kompas, April, 3, 1993. Leiderman, Leonardo and Mario I. Blejer (1988), "Modelling and Testing Ricardian Equivalence, A Survey", International Monetary Fund Staff Papers, p.1-35. Maddala, G.S. (1992), Introduction to Econometrics, MacMillan Publishing Company, 1992. Mangkusubroto, Guritno (1994), Kebijakan Ekonomi Publik di Indonesia. O'Driscoll, Gerald P. (1977), "The Ricardian Non-equivalence Theorem", Journal of Political Economy, p. 207-215. Parkin, Michael and Robin Bade (1982), Modern Macroeconomics, Philip Allan Published Limited, Oxford, UK. Phillips, P.C.B. (1986), "Time Series Regression with A Unit Root", Econometrica, 33, p. 311-340. Scarth, William M. (1988), Macroeconomics: An Introduction to Advanced Methods, Hartcourt Brace Jovanovich. Seater, John J. (1993), "Ricardfan Equivalence", Journal of Economic Literature, Vol. XXXI, March, p. 142-190. Wickens M.R., and T.S. Breusch (1988), "Dynamic Speci/ication, The Longrun and the Estimation of Transformed Regression Models", Economic Journal, 98, p. 189-205.



DOI: https://doi.org/10.22146/jieb.39931

Article Metrics

Abstract views : 274 | views : 372

Refbacks

  • There are currently no refbacks.




Copyright (c) 1995 Jurnal Ekonomi dan Bisnis Indonesia (Journal of Indonesian Economy and Business)

License URL: http://creativecommons.org/licenses/by-sa

Journal of Indonesian Economy and Business

Journal

Editorial Team
Focus and Scope
Peer Review Process
Publication Ethics
Screening for Plagiarism

Authors

Author Guidelines
Submission Guidelines
Online Submissions
Copyright Notice
Privacy Statement
Author Fees

Download

Author Pack
Submission Form & Manuscript Template

 

Reviewer

Reviewer Guidelines
Reviewer Acknowledgement

 

Reader

General Search
Achieves
Author index
Title index

 

 

The Journal of Indonesian Economy and Business (print ISSN 2085-8272; online ISSN 2338-5847) is published by the Faculty of Economics and Business Universitas Gadjah Mada, Indonesia. The content of this website is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License

© 2019 Journal of Indonesian Economy and Business 
 Visitor Statistics