Budget deficit and inflation: the Peruvian experience

Choudhary, M. Ali; Parai, Amar K.

doi:10.1080/00036849100000015

Cited by 17 publications

(15 citation statements)

References 11 publications

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“…Dwyer (1982); Darrat (1985); Ahking and Miller (1985); Choudhary and Parai (1991); Dogas (1992); Hondroyiannis and Papapetrou (1994); Karras (1994); Metin (1998), Darrat (2000); among others) examining the relationship between budget deficits and inflation, showed strong evidence that the budget deficit financed through monetisation and a rising money supply could lead to inflation. However, the inflationary effect of government deficits depends upon the means by which the deficit is financed and the impact of that on aggregate demand.…”

Section: Discussionmentioning

confidence: 99%

“…Furthermore, Dornbusch and Fischer (1981), Bhalla (1981), Siddiqui (1989), Choudhary and Parai (1991), Buiter and Patel (1992), Dogas (1992), Sowa (1994), Hondroyiannis and Papapetrou (1994), and Metin (1995;, Darrat (2000), among many others conducted empirical studies of the relationship between the budget deficit and inflation in developing countries. Specifically, Choudhary and Parai (1991) used the rational expectations macro model of inflation to examine the impact of the anticipated budget deficits on inflation rates by using the quarterly data of Peru for the period 1973-:1 to 1988:1.…”

Section: Deficits and Inflationmentioning

confidence: 99%

“…This stems from different theories of deficits and inflation. These studies started from Darrat (1985), Ahking and Miller (1985), Choudhary and Parai (1991), Dogas (1992), Hondroyiannis and Papapetrou (1994), Metin (1998), Darrat (2000), among others, which find that the budget deficit exerted a significant impact on inflation. In contrast, other studies (e.g.…”

Section: Deficits and Inflationmentioning

confidence: 99%

“…Specifically, Choudhary and Parai (1991) used the rational expectations macro model of inflation to examine the impact of the anticipated budget deficits on inflation rates by using the quarterly data of Peru for the period 1973-:1 to 1988:1. They found that budget deficits, as well as the growth rate of money supply, have significant impacts on inflation.…”

Section: Deficits and Inflationmentioning

confidence: 99%

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The Budget Deficit and Economic Performance: A Survey

Saleh

Harvie

2005

Singapore Econ. Rev.

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The relationship between budget deficits and macroeconomic variables (such as growth, interest rates, trade deficit, exchange rate, among others) represents one of the most widely debated topics among economists and policy makers in both developed and developing countries. However, the purpose of this paper is to examine the extensive literature to such a relationship, concentrating on theoretical debates, empirical studies, and econometric models in order to derive substantive conclusions, which can be beneficial in terms of macroeconomics area or in terms of constructing or developing a macroeconomic model for analysing the impact of budget deficits on macroeconomic variables. The majority of these studies regress a macroeconomic variable on the deficit variable. These studies are cross-country and utilise time series data. In general the key outcomes from the studies presented in this paper indicated that both the method of financing and the components of government expenditures could have different effects. Therefore, it is crucial to distinguish between current and capital expenditure when evaluating the impact of fiscal policy on private investment and output growth. Even though, the overall results from the empirical literature with respect to the impact of public investment on private investment and growth are ambiguous, the bulk of the empirical studies finds a significantly negative effect of public consumption expenditure on growth, while the effects of public investment expenditure are found to be positive although less robust. The key outcome from all of the studies presented in this paper which investigating the relationship between the budget deficit and current account deficit showed strong evidence in both developed and developing countries towards supporting the Keynesian proposition (conventional view) which suggests that an increase in the budget deficit would induce domestic absorption and, hence import expansion, causing a current account deficit. Furthermore, it can also be concluded from the empirical findings that the effects of budget deficits on exchange rates depends on the way of funding the deficits, whether through taxation or through money growth. The key findings from the empirical studies investigating the relationship between the budget deficit and interest rates indicated strong evidence towards supporting the Keynesian model of a significant and positive relationship between budget deficits and interest rates. The major outcomes from the empirical studies examining the relationship between budget deficits and inflation showed strong evidence that the budget deficit financed through monetisation and a rising money supply could lead to inflation. * I would like to thank A/P Charles Harvie and A/P Edgar J Wilson for their helpful comments and suggestions.

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Section: Discussionmentioning

confidence: 99%

Section: Deficits and Inflationmentioning

confidence: 99%

Section: Deficits and Inflationmentioning

confidence: 99%

Section: Deficits and Inflationmentioning

confidence: 99%

See 2 more Smart Citations

The Budget Deficit and Economic Performance: A Survey

Saleh

Harvie

2005

Singapore Econ. Rev.

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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%

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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State credit programs and the peasantry under populist regimes: Lessons from the APRA experience in the Peruvian Amazon

Coomes

1996

World Development

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Budget deficit and inflation: the Peruvian experience

Cited by 17 publications

References 11 publications

The Budget Deficit and Economic Performance: A Survey

The Budget Deficit and Economic Performance: A Survey

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

State credit programs and the peasantry under populist regimes: Lessons from the APRA experience in the Peruvian Amazon

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