Are fiscal deficits inflationary?

Lin, Hsin-Yi; Chu, Hao-Pang

doi:10.1016/j.jimonfin.2012.04.006

Cited by 110 publications

(99 citation statements)

References 54 publications

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“…However, money growth has no effect on real GDP growth, budget deficit growth and interest rate. Second, despite the fact that Catao and Terrones (2005), and Lin and Chu (2013) found a strong positive relation between fiscal deficits and inflation among highinflation and developing countries, empirical results of this study reveal that shocks to budget deficit growth have no effect on real GDP growth, interest rate, money growth and therefore inflation. This finding, however, shares a conclusion with Barnhart andDarrat (1988), andAshra, Chattopadhyay, andChaudhuri (2004) in which budget deficits have no significant effect on money growth in OECD countries and India, respectively.…”

Section: Discussioncontrasting

confidence: 63%

“…Similarly, Nina, Wojciech, Georges and Geomina (2006) found that inflation in Romania in the period 1992-2000 was caused by high money growth rate. Lin and Chu (2013) employed the dynamic panel quantile regression (DPQR) model under the autoregressive distributional lag (ARDL) specification, and investigated the causality between budget deficits and inflation in 91 countries between 1960 and 2006. The empirical results show that the fiscal deficit had a strong impact on inflation in high-inflation periods, and had a weak impact in low-inflation episodes.…”

Section: Literature Reviewmentioning

confidence: 99%

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Budget Deficit, Money Growth and Inflation: Empirical Evidence from Vietnam

Khieu

2014

SSRN Journal

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This study empirically examines the nexus among budget deficit, money supply and inflation by using a monthly data set from January 1995 to December 2012 and a SVAR model with five endogenous variables, inflation, money growth, budget deficit growth, real GDP growth and interest rate. Since real GDP and budget deficit are unavailable on the monthly basis, we interpolate those series using Chow and Lin's (1971) annualized approach from their annual series. Overall, we found that money growth has positive effects on inflation while budget deficit growth has no impact on money growth and therefore inflation. In addition, budget deficit is autonomous from shocks to other variables. The estimation results also reveal that the State Bank of Vietnam implemented tightening monetary policy in response to positive shocks to inflation by reducing money growth but the response was relatively slow because it took three months for the monetary authority to fully react to such shocks. Finally, interest rate was not an effective instrument for fighting inflation but it was significantly and positively influenced by inflation.

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Section: Discussioncontrasting

confidence: 63%

Section: Literature Reviewmentioning

confidence: 99%

Budget Deficit, Money Growth and Inflation: Empirical Evidence from Vietnam

Khieu

2014

SSRN Journal

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“…There are some studies for the US (Hamburger and Zwick [25]; Dwyer [26]; Darrat [27]; Ahking and Miller [28]) and the others are related to developed countries (King and Plosser [29]; Giannaros and Kolluri [30]; Protopapadakis and Siegel [31]; Barnhart and Darrat [32]). About these topics, there are lots of papers for some other countries (Ho [33]; Siddiqui [34]; Burdekin and Wohar [35]; De Haan and Zelhorst [36]; Choudhary and Parai [37]; Buiter and Patel [38]; Dogas [39]; Sowa [40]; Hondroyiannis and Papapetrou [41] Metin [42]; Metin [43]; Domac and Yucel [44]; Lin and Chu [45]; Jalil, Tariq and Bibi [6]). …”

Section: Literature Reviewmentioning

confidence: 99%

“…They suggest that inflation is not Granger-cause fiscal deficit in the model. Lin and Chu [45] investigate the relationship between inflation and deficits in 91 countries during the period 1960 to 2006 with dynamic panel quantile regression model under the autoregressive distributional lag (ARDL) specification. Empirical results indicate that fiscal deficit has a strong effect on the inflation in the high-inflation events, but it is weak in the low-inflation episodes.…”

Section: Literature Reviewmentioning

confidence: 99%

Revisit the Budget Deficits and Inflation: Evidence from Time and Frequency Domain Analyses

Tiwari¹,

Bolat²,

Koçbulut³

2015

TEL

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The purpose of this paper is to test the relationship between budget deficits and inflation for nine EU countries during the period of 1990-2013 using the quarterly data. Recently, the public deficits and inflation have had an increasing importance for developing/emerging and developed countries to build the stability macroeconomic performance in the long run. This study is the first attempt to determine the relationship between the inflation and budget deficits for nine EU countries using different bootstrap causality tests. We employ the bootstrap causality and Granger causality test in the frequency domain analysis which allows us to distinguish short and long-run causality. We do not find a relationship between these variables when we employ bootstrap causality analysis. While the frequency domain causality shows that there is no relationship causality from budget deficits to inflation for all countries, causality from inflation to budget deficits indicates a permanent (long-run) relationship for Belgium, and France.

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“…As Koenker and Halloc (2001) mention, every attempt to chop the sample into high, medium and low values of Y and then running an OLS on the every subset is not a solution, since it would generate sample selection bias. However, some authors as Miles and Schreyer (2012), Sula (2011), Lin andChu (2013) circumvented the problem using a quantile regression method. In the paper, authors also followed this methodology.…”

Section: Quantile Regression Approachmentioning

confidence: 99%

10.5937/industrija42-5561 = Exchange rate effect on stock returns in the East European emerging markets: A quantile regression approach

Živkov¹,

Njegić²,

Markelić³

2014

Industrija

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This paper investigates relationship between returns of stock prices and exchange rate changes in four East European emerging markets (Serbia, Poland, Hungary and Czech Republic) , Vol.42, No.3, 2014 Češkoj) upotrebljavajući nedeljne podatke od januara 2003 do juna 2013. U ekonomskoj literaturi dve teorije objašnjavaju tu vezu -model na bazi toka i medel ravnotežnog portfolio, međutim bez konačnog i definitivnog zaključka koja teorija preovlađuje. Uzimajući u obzir relativno širok uzorak koji obuhvata i period svetske ekonomske krize, empirijski podaci koji su upotrebljeni su kompromitovani zbog prisustva strukturnih lomova i empirijske raspodele koja nije normalna. Kako bismo izbegli pristrasnost ocenjenih parametara i pogrešne zaključke, autori su opotrebili četiri ADL(2,2) modela ocenjena uz pomoć metode kvantilne regresije koja je otporna na problem raspodele koja ne prati normalnu distribuciju. Rezultati ukazuju da je veza između tih varijabli u skladu sa modelom ravnotežnog portfolio u tri od četiri analizirane zemlje.

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Are fiscal deficits inflationary?

Cited by 110 publications

References 54 publications

Budget Deficit, Money Growth and Inflation: Empirical Evidence from Vietnam

Budget Deficit, Money Growth and Inflation: Empirical Evidence from Vietnam

Revisit the Budget Deficits and Inflation: Evidence from Time and Frequency Domain Analyses

10.5937/industrija42-5561 = Exchange rate effect on stock returns in the East European emerging markets: A quantile regression approach

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