Fiscal deficits and inflation

Catão, Luis; Terrones, Marco E.

doi:10.1016/j.jmoneco.2004.06.003

Cited by 252 publications

(201 citation statements)

References 24 publications

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“…6 This may strengthen government commitment to stable in ‡ation and as a result governments will rely on spending cuts or increases in direct tax rates during periods of …scal stress, not seigniorage. 7 Aisen and Veiga (2005a) show that a de jure measure of openness taken from the Index 5 Catao and Terrones (2005) present a model in which …scal de…cits cause in ‡ation via the seigniorage channel and provide evidence consistent with the model. Click (1998) and Aisen and Veiga (2005b) provide empirical evidence on the determinants of seigniorage and in ‡ation respectively, and both studies are motivated from a public …nance perspective.…”

Section: Openness and In ‡Ation Volatilitymentioning

confidence: 64%

Openness and inflation volatility: Panel data evidence

Bowdler

Malik

2017

The North American Journal of Economics and Finance

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Trade openness can reduce inflation volatility through limiting recourse to seigniorage during periods of temporary fiscal deficits, and by shifting consumption and production towards goods for which the terms of trade are relatively stable. This paper provides evidence for a negative effect of openness on inflation volatility using a dynamic panel model that controls for the endogeneity of openness and the effects of both average inflation and the exchange rate regime. The relationship is found to be strongest amongst developing and emerging market economies. We show that openness reduces the volatility of reserve money growth and terms of trade growth and that these effects contribute to the relationship between openness and inflation volatility.

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Section: Openness and In ‡Ation Volatilitymentioning

confidence: 64%

Openness and inflation volatility: Panel data evidence

Bowdler

Malik

2017

The North American Journal of Economics and Finance

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“…Paper findings show that output gap, agricultural shocks and expansionary fiscal policies are efficient on the inflation in these countries. Catão and Terrones [3] examine inflation as non-linearly related to fiscal deficits. They try to determine between short and long-run effects of fiscal deficits for 107 countries over the period 1960-2001.…”

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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“…A mato and Gerlach (2002), Fischer et al (2002), Vu (2004, Catao and Terrones (2005), Wimanda, Turner, and Hall (2011) argue that the high rate of inflation, observed especially in many developing countries, is associated with important deficits, mainly financed by seigniorage revenue. Even more interesting, Alesina and Tabellini (1987), Obstfeld (1991), Jensen (1994), Van der Ploeg (1995), Van Arle et al (1995) and Minea et al (2011) agree on the fact that if the central bank decides to grant significant weight in its loss function to the price stability objective, it will reduce seigniorage revenue and compel the State to increase tax revenues through tax mobilization effort.…”

Section: Introductionmentioning

confidence: 99%

Inflation targeting and public deficit in emerging countries: A time varying treatment effect approach

Kadria¹,

Aïssa²

2016

Economic Modelling

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Several studies including Minea, Tapsoba and Villieu (2012) and Lucotte (2012) claim that in emerging countries, the adoption of inflation targeting (IT) monetary policy and its discipline character allow intensifying their efforts to collect tax revenue and/or expenditure rationalization, and allows the reduction of their budget deficits (Kadria and Ben Aissa, 2014). But, the lag in the effect of monetary policy contains vital information for the policy evaluation (Fang and Miller, 2011). Hence, our contribution to the previous literature is then to evaluate the time varying treatment effect of the IT's adoption by emerging countries on their budgetary discipline in terms of reducing or mastering the public deficit. To do this, we used the propensity score matching approach in order to take account of this "lag effect" or from this effect throughout time. Our empirical analysis, conducted on a sample of 41 economies (20 IT and 21 non-IT economies) for the period from 1990 to 2010, shows that the lag in effect of IT on public deficit performance proves to be shorter and gradual for emerging countries that have adopted this monetary policy framework and our conclusions corroborate the literature disciplining effect of IT on fiscal policy.

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Fiscal deficits and inflation

Cited by 252 publications

References 24 publications

Openness and inflation volatility: Panel data evidence

Openness and inflation volatility: Panel data evidence

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

Inflation targeting and public deficit in emerging countries: A time varying treatment effect approach

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