Ricardian Equivalence and Household Consumption: Evidence from Administrative Banking Microdata

This study tests the Ricardian Equivalence in the Czech Republic using a unique proprietary dataset of real banking data from 2017 to 2023. Applying panel fixed-effects models and generalized method of moments estimation, we find a robust and economically significant negative effect of personal income taxation on household consumption. The results suggest that individuals do not offset tax-induced income changes by increasing savings, providing evidence against Ricardian behaviour. By linking macroeconomic perspectives with high-frequency banking data, the paper makes a novel contribution to fiscal policy research and offers relevant implications for the design of consumption-related tax policies. JEL Classification: H3, E6, H8