Long-run fiscal dominance in Argentina, 1875–1990

Gadea, Marı́a Dolores; Sabaté, Marcela; Sanz, Isabel

doi:10.1017/s0968565012000157

Cited by 7 publications

(4 citation statements)

References 52 publications

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“…This is true of the extended periods of fiscal dominance documented by Fratianni and Spinelli (2001) and Sabaté et al(2014) for Italy and Spain going back to the nineteenth century. Post-war Argentina followed a similar pattern (Gadea et al, 2012) and it is no coincidence that the economy was repeatedly plagued by serious and sustained inflationary problems. Worldwide moves towards greater central bank independence in recent decades have worked against this practice and, in the cases of Italy and Spain, monetary control passed to the statutorily independent European Central Bank after 2002.…”

Section: Introductionmentioning

confidence: 86%

Monetary and Fiscal Policy Interactions and the Impact of the COVID-19 Pandemic

Burdekin,

Horan,

Tao

2024

IJFBS

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Although the onset of the pandemic pressured monetary and fiscal policy across the globe, deficit finance was aided by the large, established debt markets in countries like the United States. The expansionary efforts in emerging markets like Latin America put greater strains on their more limited capacity. Our study analyzes data from seven Latin American countries, three European countries, three Asian countries, and the United States. We utilize panel vector autoregressive (VAR) models to explore the dynamic interactions and feedback mechanisms among the policy variables, while accounting for unobserved country-specific effects. Our results demonstrate strong and significant interactions between monetary and fiscal policy around the time of the pandemic, with the primary causal effects running from fiscal to monetary policy. Additionally, our results yield evidence of countercyclical policy reactions to inflation for both monetary and fiscal policy over the pandemic period.

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Section: Introductionmentioning

confidence: 86%

Monetary and Fiscal Policy Interactions and the Impact of the COVID-19 Pandemic

Burdekin,

Horan,

Tao

2024

IJFBS

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“…The fiscal dominance hypothesis points to the interactions between fiscal and monetary policy, and in such a situation, fiscal policy becomes an appropriate channel for controlling inflation instead of the monetary policy (Gadea et al, 2012;Nachega, 2005). The association between fiscal deficit and inflation has been widely examined in the case of both developed and developing economies and mostly found to be in a significant positive relationship (Adu & Marbuah, 2011;Nguyen, 2015;Solomon & De Wet, 2004).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Accordingly, the fiscal deficit has put pressure on central banks for monetary expansion, and consequently, the fiscally driven monetary expansion became dominant due to high inflation, which is known as the ‘fiscal dominance hypothesis’ in the literature (Bildirici & Ersin, 2005; Leeper, 1991; Nachega, 2005; Sims, 1994). The fiscal dominance hypothesis points to the interactions between fiscal and monetary policy, and in such a situation, fiscal policy becomes an appropriate channel for controlling inflation instead of the monetary policy (Gadea et al, 2012; Nachega, 2005). The association between fiscal deficit and inflation has been widely examined in the case of both developed and developing economies and mostly found to be in a significant positive relationship (Adu & Marbuah, 2011; Nguyen, 2015; Solomon & De Wet, 2004).…”

Section: Literature Reviewmentioning

confidence: 99%

Fiscal Dominance and the Inflation Dynamics in Pakistan: An Empirical Analysis

et al. 2022

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The presence of high inflation coupled with a persistent and ever-increasing fiscal deficit is the key problem being faced by the developing economies. The fiscal dominance hypothesis suggests that a developing economy is prone to high persistent inflation when government authorities run huge persistent budget deficits and get them financed through money creation. The primary objective of the current study is to test and examine the presence of the fiscal dominance situation over the period 1971–2020. The current study has modelled inflation as a fiscally driven monetary phenomenon by combining monetary and fiscal variables. The study has used the autoregressive distributed lag (ARDL) technique to analyse the long-run and short-run dynamics in a unified framework. The empirical results point to strong and statistically significant long-term relationships between budget deficits and money growth and between money creation and inflation. The study validates the presence of the fiscal dominance hypothesis in the case of a developing economy. The results imply that fiscal dominance handling through a realistic and continuous process of fiscal adjustments on the back of supported monetary policy is necessary for attaining and sustaining price stability in developing countries like Pakistan. In the context of public finance, a broad and wide-ranging tax reforms (increasing the tax base, designing an inflation-proof tax system, and improving tax administration and collection), rationalized government expenditures and privatization of loss-making state enterprises are crucial in establishing the trustworthy fiscal policy.

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“…A vast literature has grown up around the topic of fiscal dominance: Gadea et al (2012), examine the nexus between seignorage and the prevalence of fiscal dominance in Argentina for the 1875-1990 estimation period. Their findings indicate that there exists a dynamic relationship between deficits and monetary base in the long run which clearly hints that the economy is characterized by fiscal dominance in the long run.…”

Section: Literature Reviewmentioning

confidence: 99%

Türk Kamu Mali̇yesi̇nde Parasal Ve Mali̇ Baskinlik

CAN>

2022

Beykoz Akademi Dergisi

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The interactive roles of monetary and fiscal policies are represented by two competing theories in the literature. The advocates of the first theory, the monetarist view, argue that the fiscal authorities tune the primary balance in an attempt to preserve the fiscal solvency for each price level. On the contrary, the proponents of the new approach assert that the fiscal authorities are able to set primary surplus without making a binding commitment to restore solvency. In this study, the purpose is to figure out which approach is valid for Turkish public finances. To accomplish this objective, we run a model based on Bohn (1998) using the Auto Regressive Distributed Lag (ARDL) method so as to determine the type of regime prevalent in the Turkish economy. Besides, we run a Toda-Yamamoto type causality analysis to detect the direction of causality among public debt and primary balances. The results from both analyses reveal that the Turkish public finances are characterised by monetary dominant regimes which indicate that the fiscal solvency is restored by primary balance alterations by a set of active fiscal policy actions.

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Long-run fiscal dominance in Argentina, 1875–1990

Cited by 7 publications

References 52 publications

Monetary and Fiscal Policy Interactions and the Impact of the COVID-19 Pandemic

Monetary and Fiscal Policy Interactions and the Impact of the COVID-19 Pandemic

Fiscal Dominance and the Inflation Dynamics in Pakistan: An Empirical Analysis

Türk Kamu Mali̇yesi̇nde Parasal Ve Mali̇ Baskinlik

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