Ricardian Equivalence Hypothesis in the Sub-Sahara African Countries

Ricardian Equivalence Hypothesis in the Sub-Sahara African Countries

The validity of the Ricardian equivalence proposition remains disputed in spite of the numerous empirical studies. This study utilized panel ARDL estimation approach to investigate the evidence of Ricardian Equivalence Hypothesis in five Sub-Sahara African countries, namely Botswana, Ghana, Gambia, Nigeria, and Kenya over the period of 1981~2014. The results show that GDP per capita and interest rate have significant positive impacts on private consumption, whereas government debt, government spending, and government interest payment on the outstanding debt have negative impacts on private consumption. From the perspective of this study, the Ricardian equivalence hypothesis, which states that private consumption remains unchanged regardless of government s spending, does not hold in Sub-Sahara African countries.