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Fiscal Deficits and Inflation A New Look at the Emerging Market Evidence

Empirical studies have had little success in finding a statistically significant relationship between fiscal deficits and inflation in broad cross-country panels. This paper provides new econometric estimates for a panel of 23 emerging market countries during 1970-2000. Unlike previous studies, we a...

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Bibliographic Details
Main Author: Terrones, Marco
Other Authors: Catão, Luis
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2001
Series:IMF Working Papers
Subjects:
Sovereign Debt
Public Finance & Taxation
International Economics
Debt
Price Level
Energy: Demand And Supply
Interest Payments
Debts, Public
Foreign Exchange
Government Debt Management
Prices
Public Financial Management (pfm)
Exports And Imports
Inflation
External Debt
Macroeconomic Policy, Macroeconomic Aspects Of Public Finance, And General Outlook: General
Currency
Exchange Rate Arrangements
Macroeconomics
Debt Service
Public Finance
Deflation
Debt Management
Oil Prices
International Lending And Debt Problems
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:Empirical studies have had little success in finding a statistically significant relationship between fiscal deficits and inflation in broad cross-country panels. This paper provides new econometric estimates for a panel of 23 emerging market countries during 1970-2000. Unlike previous studies, we allow for a rich dynamic specification and focus on the long-run relationship between the two variables controlling for differences in the inflation tax base. We find that a 1 percentage point reduction in the ratio of fiscal deficit to GDP typically lowers long-run inflation by 1½ to 6 percentage points, depending on the size of the inflation tax base
Physical Description:31 pages
ISBN:9781451849592

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