Ricardian Equivalence in the 21st Century (a European Experience)

This thesis is a contribution to the discussion on Ricardian equivalence and can be split in two parts. The first part is theoretical, where the focus lies on the economical theory behind Ricardian equivalence and it takes a look at a selection of existing research. The second part is empirical, where with the help of a consumption function based on Stanley (1998), I test whether Ricardian equivalence holds for eleven European countries, both euro and non-euro countries. The findings are mixed; Ricardian equivalence is rejected in the majority of the countries. Nevertheless for some countries Ricardian equivalence holds.