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Ricardian equivalence and the media narrative of fiscal policy: a time series study of the Swedish economy

Liungman, Noa LU and Kurzewski, Simon (2026) STAH11 20252
Department of Statistics
Abstract (Swedish)
This study tests whether the Ricardian Equivalence Hypothesis holds in Sweden when the private
sector faces an intertemporal budget constraint skewed by the media narrative. Time series analysis
of cointegrated vector autoregressive processes is utilized to identify Ricardian consumer behavior in
three different models, in order to find differences in consumer behavior when media narrative bias is
accounted for versus when it is not accounted for. Large language models are used to create an index
of media perceptions of government fiscal policy. Cointegrating vectors are studied for testing of the
no-Ponzi scheme condition, and the structured vector error correction model is used to model the
impact on consumption from fiscal... (More)
This study tests whether the Ricardian Equivalence Hypothesis holds in Sweden when the private
sector faces an intertemporal budget constraint skewed by the media narrative. Time series analysis
of cointegrated vector autoregressive processes is utilized to identify Ricardian consumer behavior in
three different models, in order to find differences in consumer behavior when media narrative bias is
accounted for versus when it is not accounted for. Large language models are used to create an index
of media perceptions of government fiscal policy. Cointegrating vectors are studied for testing of the
no-Ponzi scheme condition, and the structured vector error correction model is used to model the
impact on consumption from fiscal expansion and government financing changes. The results show
that the no-Ponzi scheme condition is violated because the private and public sector over-compensate
by saving. Furthermore, results show no significant effect from government spending on consumption,
but do show that consumption increases in the short run following a financing restructuring towards
a higher degree of taxation. The effects of media narrative bias are undetermined, but there are
indicators that available information is crucial for a consumer response to policy changes. (Less)
Please use this url to cite or link to this publication:
author
Liungman, Noa LU and Kurzewski, Simon
supervisor
organization
course
STAH11 20252
year
type
M2 - Bachelor Degree
subject
keywords
Ricardian, VAR processes, VECM, Large Language Models
language
English
id
9221869
date added to LUP
2026-04-20 14:19:29
date last changed
2026-04-20 14:19:29
@misc{9221869,
  abstract     = {{This study tests whether the Ricardian Equivalence Hypothesis holds in Sweden when the private
sector faces an intertemporal budget constraint skewed by the media narrative. Time series analysis
of cointegrated vector autoregressive processes is utilized to identify Ricardian consumer behavior in
three different models, in order to find differences in consumer behavior when media narrative bias is
accounted for versus when it is not accounted for. Large language models are used to create an index
of media perceptions of government fiscal policy. Cointegrating vectors are studied for testing of the
no-Ponzi scheme condition, and the structured vector error correction model is used to model the
impact on consumption from fiscal expansion and government financing changes. The results show
that the no-Ponzi scheme condition is violated because the private and public sector over-compensate
by saving. Furthermore, results show no significant effect from government spending on consumption,
but do show that consumption increases in the short run following a financing restructuring towards
a higher degree of taxation. The effects of media narrative bias are undetermined, but there are
indicators that available information is crucial for a consumer response to policy changes.}},
  author       = {{Liungman, Noa and Kurzewski, Simon}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Ricardian equivalence and the media narrative of fiscal policy: a time series study of the Swedish economy}},
  year         = {{2026}},
}