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Budget Deficit Financing and Economic Well-Being in Benin: Testing the Ricardian Equivalence Theory
Authors: Ahouidji Tanguy Agbokpanzo*, Symphorien Zogbasse†, Prince Kuessi Houssou‡, Jonhson Lazare Amèdjiko Houessou§, Alastaire Sèna Alinsato¶
ISSN: 2709-8575
Affiliations: * Université d’Abomey-Calavi (UAC), Laboratoire d’Economie Publique (LEP), † Université d’Abomey-Calavi (UAC) Laboratoire d’Economie Publique (LEP), ‡ Université d’Abomey-Calavi (UAC), Laboratoire d’Economie Publique, § Laboratoire d’Economie Publique (LEP), ¶ Université d’Abomey-Calavi (UAC), Laboratoire d’Economie Publique (LEP).
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 227–248
Abstract
This article examines the validity of Ricardian equivalence theory in Benin over the period 1980 to 2020. The study uses a time series with the Autoregressive Long-Lived Regressions (ARDL) model. The results show that budget deficit financing has a positive effect on household consumption in the short term, and a negative effect in the long term. On the other hand, budget deficit financing has a positive effect on gross domestic product in the short term and no significant effect in the long term. These results suggest that budget deficit financing has different short- and long-term effects on economic well-being in Benin. Consequently, policymakers should consider complementary strategies to support long-term economic growth and ensure the sustainability of fiscal policies.