Report
There should be massive “Ricardian neutrality” currently
Fiscal deficits i n OECD countries were very high during the COVID crisis, and they will again be very high because of the war in Ukraine. Households in these countries should expect that fiscal deficits will have to be reduced markedly at some point in the future, especially if central banks normalise their monetary policies, and that, given the need for high public spending, this will be achieved mostly through tax increases. If this future tax increase is rationally expected (if there is “Ricardian neutrality”), it should immediately lead to an increase in savings and a fall in consumption, and to an increase in companies’ reserves (uninvested earnings), which can be seen for : Households in the euro zone and Japan; Companies in the United States, the United Kingdom and the euro zone.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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