Government borrowing and monetary accommodation

Allen, Stuart D.; Smith, Michael D.

doi:10.1016/0304-3932(83)90041-7

Cited by 51 publications

(14 citation statements)

References 10 publications

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“…These findings also do not find any evidence of debt monetization or otherwise, as the monetary base growth does not respond to debt growth in regime 2. This finding, perhaps on principle, refutes the conclusion of debt monetization in Godek (), Grier and Neiman (), and Allan and Smith (). Arguably, conform to Tabellini and La Via () conclusion that there is no debt monetization in the USA.…”

Section: Results and Analysissupporting

confidence: 78%

“…The authors report, using quarterly data from 1957–83, that the federal deficit significantly affects monetary response undertaken by the Fed. Allen and Smith () explore the relationship between Treasury borrowing and monetary growth in the USA. These authors report evidence of Treasury borrowing positively and significantly impacting the growth in the monetary base.…”

Section: Literature Reviewmentioning

confidence: 99%

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Monetary base and federal government debt in the long‐run: A non‐linear analysis

Ahmed

2019

Bulletin of Econ Res

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Government bonds are usually traded between the financial institutions and the Fed during the open market operations. These operations impact the bank reserves, subsequently influencing the monetary base. The monetary base and government bonds may portray a common trend and government debt could potentially bind the central bank to debt monetization. This paper, using monthly data on federal government debt and the monetary base from 1947:1 to 2018:10, investigates the presence of a long-run equilibrium relationship between the two variables and as to how the long-run equilibrium relationship vary in the short-run. Threshold cointegration tests find evidence of a long-run equilibrium relationship. Estimates of the threshold vector error-correction model find statistically significant evidence of contraction in the monetary base growth in the short-run in regime 1. In regime 2, the growth in the monetary base does not adjust to accommodate faster government debt growth. These estimates find no evidence of debt monetization or otherwise in either of the regimes in the United States. The Fed, by reducing the monetary base, perhaps focuses more on the inflation target. The findings also suggest a potential scenario where the Fed and the fiscal authority are not conjoined with each other in their operations.

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Section: Results and Analysissupporting

confidence: 78%

Section: Literature Reviewmentioning

confidence: 99%

Monetary base and federal government debt in the long‐run: A non‐linear analysis

Ahmed

2019

Bulletin of Econ Res

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“…Empirical studies on the budget deficit-inflation nexus have produced mixed results. Some studies, including Allen and Smith (1983), Grossman (1982), Hamburger and Zwick (1981), Darrat (2000), Tanner and Devereux (1993), and McMillin (1986) found evidence that budget deficits are related to either inflation or the growth rate of money supply. In other words, these studies provide evidence in support of the hypothesis that budget deficits are inflationary.…”

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confidence: 99%

An Empirical Investigation Into the Budget Deficit ‐ Inflation Nexus in South Africa

Anoruo

2003

South African J Economics

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“…They report that unemployment and (to a lesser extent) inflation were most commonly cited as significant determinants of Federal Reserve policy during various portions of the 1952-77 period. More recent papers by Abrams, Froyen, and Waud [1980], Levy [1981], Allen and Smith [1983], Bradley [1984], Witte [1984a, 1984bl and Bradley and Potter [1986 have extended the literature by including additional variables and time periods in the analysis. Two papers deal tangentially with reaction functions for the 1979-82 period.…”

Section: Methodsmentioning

confidence: 99%

1979–1982: Rules or Discretion in Monetary Policy?

Hoelscher

1990

Economic Inquiry

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What determined MI growth from November 1979 through October 1982? A reaction function is developed and tested which ascribes the level of M1 to two Fed motives. One is the Fed's desire to hit its money growth targets, the other is to carry out a counter‐cyclical short‐run monetary policy. Both motives are found to be significant during the period. This evidence is consistent with the contention of some economists that the period was not a valid test of monetarist policy rules.

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Government borrowing and monetary accommodation

Cited by 51 publications

References 10 publications

Monetary base and federal government debt in the long‐run: A non‐linear analysis

Monetary base and federal government debt in the long‐run: A non‐linear analysis

An Empirical Investigation Into the Budget Deficit ‐ Inflation Nexus in South Africa

1979–1982: Rules or Discretion in Monetary Policy?

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