This study analyzes the Ricardian equivalence hypothesis (REH) and its sources of deviation in selected emerging market economies (EME). Different theoretical specifications both linear and nonlinear are used to empirically test REH for the panel of 18 EME using data from 1985-2009 and applying generalized method of moments estimation technique. Our results reveal that real per capita consumption (C) is correlated with real per capita income (Y), real per capita taxes (T), real per capita government expenditures (G), real per capita government debt (A) and with real per capita budget deficit (d). Empirical results show that coefficients of income (Y), government expenditures (G) and government debt (A) are positive and statistically significant. This implies that an increase in income, government expenditure and government debt increases private consumption. Coefficients of taxes (T) and budget deficit (d) are negative and statistically significant. This reveals that an increase in taxes and budget deficit reduces private consumption. The relationship between trade deficit and budget deficit shows that an increase in budget deficit decreases trade deficit. Our findings suggest that Ricardian equivalence hypothesis is invalidated in case of EME hence fiscal policy is effective in these economies and should be used as a major policy tool to boost private consumption and to control trade deficit. Presence of liquidity constrained households and finite survival rates are the main sources of failure of REH in these economies. Supervisor:- Dr. Attiya Yasmin Javid