Are Fiscal Deficits Really Inflationary? An Investigation Into Ethiopia’s Experience

Abstract

This study establishes long-run relations between budget deficits and inflation, while controlling for money supply owing to the justified links between deficits and money supply especially for developing countries. We employed time series data with temporal coverage of 1980-2018. Augmented Dickey Fuller has tested nonstationary for all series, but with all stationary at first difference. The Engle-Granger (1981) methodology for Cointegration tested long-run relation between budget deficits, money supply and inflation. Due to Laney and Willet (1983), the conventional least squares regression was adopted to estimate parameters of long-run equation. The results evidenced that fiscal deficits and money supply have been at the root of galloping inflation in Ethiopia. Besides, budget deficits have been the root cause of money supply growth in Ethiopia; while giving empirical support to the hypothesis that, governments of least developed countries resort to monetize large portion of their deficits. There is a need to reform the fiscal aspect of the government, if the mounting rate of deficits has to be lessened. Budgetary imbalances can be rectified through enhancement of domestic capital market and setting limits on central bank borrowing. Besides, it could be vital to expand the tax base as well as intensify efficiency of the existing tax system in the country.

Domestic verses foreign borrowing: Does the mode of fiscal deficit financing matter for inflation in Sub-Saharan African countries?

“…These stimuli were mainly financed through public borrowing (Heitzig et al, 2021). Numerous studies have analyzed the relationship between fiscal deficit financing and inflation (see (Alemu, 2020;Ekinci, 2016;Fasanya, Fajobi, & Adetokunbo, 2021;Sethi, Bhujabal, Das, & Sucharita, 2019;Yien, Abdullah, & Azam, 2017)). It is still an open debate on which mode of deficit financing causes more macroeconomic instability especially inflation than the other.…”

Fish consumption and quality by peri-urban households among fish farmers and public servants in Ethiopia

“…The Ethiopian water body could support a yield of 94,000 tons of fish per year, indicating substantial contribution to food security and income generation (Deng, 2020). Coincident with the potential volume of fishery resources, there is a need to enhance fish consumption habit and improve the quality of available fishery products (Alemu and Adesina, 2016;Yilma et al, 2020). It is evidenced that the annual per capita consumption of fish was 240 g/person which is less than 10% of fish consumption in East African sub-region (MOA, 2002;Tesfaye and Wolff, 2014).…”

“…In addition, the frequency and preference of Non-sensory factors (risk perception, behaviour, personal attributes and beliefs) as well as sensory elements (texture, taste, smell, freshness) may influence food preferences, including fish (Honkanen et al, 2005). Moreover, it is reported that fish consumption in Ethiopia is limited due to lack of interest, lack of availability, fear of spoilage, religious matter and lack of habit of consumption (Alemu and Adesina, 2016). Fish consumption, production, and export could all be improved by implementing practical and long-term plans to solve linked obstacle factors in one's own country (Supartini et al, 2018).…”