RICARDIAN EQUIVALENCE PARADIGM CONTRADICTION: GOVERNMENT DEBT AS A FISCAL POLICY INSTRUMENT AGAINST CONSUMPTION IN 6 ASEAN COUNTRIES

Abstract

Fiscal policy in the form of government debt is become an interest debate using Ricardian Equivalence Hypothesis. Because Ricardian Equivalence Hypothesis is opposite to Keynes teory. Ricardian Equivalence Hypothesis assume that the community behaves rationally, government debt at this time will lead to public burden in the future, the government debt will not affect the consumption of society. Ricardian Equivalence Hypothesis becomes a interest in various countries of ASEAN with the majority of emerging economies. The study will examine the validity od ricardian equivalence hypothesis in 6 ASEAN countries by using secondary data on household consumption, government debt, gross dometic bruto, government expenditure and tax revenue. The study is using data panel model in the period following the Asian crisis in1998 and period following the global crisis in 2008. The results of the aftermalth of the Asian crisis showed a variable of government debt, gross domestic bruto and government expenditure with a significants overpost on household consumption while the tax revenue variable had a negative relationship to household consumption. The results estimation of the global post-crisis estimaties indicate gross domestic bruto variable with significants overage on household consumption while the government debt variable, government expenditure and tax revenue have a negative relationship to household consumption.

Keywords: Government Debt; Ricardian Equivalence; Consumption; ASEAN; Panel Data Model