The Impact of Fiscal Deficit on Inflation in Namibia

Eita, Joel Hinaunye; Manuel, Victoria; Naimhwaka, Erwin; Nakusera, Florette

doi:10.2478/jcbtp-2021-0007

Cited by 4 publications

(4 citation statements)

References 18 publications

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“…The intertwining of monetary and financial policies is clear, as money growth through its multiplier effect provides a source of income for government expenses. The question of whether a budget deficit leads to inflation or not hinges on the central bank's autonomy in determining monetary policies to cover the deficit (Eita et al, 2021). Negative effects of budget deficits on the American economy have been highlighted (Williamson, 2018).…”

Section: Introductionmentioning

confidence: 99%

Unraveling the Dynamics of Budget Deficit Determinants in Afghanistan

Nasir Amiri,

Mohammadzai

2023

Integr. J. Res. Arts Humanities

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Across various nations, including Afghanistan, the government plays a pivotal role in coordinating a multitude of national activities, spanning critical sectors like infrastructure, education, and healthcare. The responsibility for executing extensive construction projects and providing essential medical and educational services rests squarely on the shoulders of the government. Meeting these obligations demands a substantial budget allocation. However, challenges can emerge, potentially leading to a budget deficit. Such shortfalls might arise due to a failure to achieve projected revenues, escalated expenditures, or a combination of both. This article endeavors to deeply examine the intricate interplay of diverse factors that contribute to such fiscal gaps, with a specific focus on Afghanistan. The central inquiry revolves around comprehending and delineating the complex relationships among key variables, notably subsidies, inflation rates, tax revenues, income from natural resources, government expenditures, economic growth trajectories, instances of conflict, electoral processes, unemployment rates, and demographic trends. The rationale for singling out and scrutinizing these particular variables draws from a fusion of economic theories, including the Keynesian framework, optimal finance theory, random loan theory, and general choice theory. In this current study, the concept of a budget deficit assumes the role of the dependent variable within the analytical model. It is operationally defined as the disparity between the government's overall expenditures and its generated revenues. Through a comprehensive exploration of the multifaceted connections among the aforementioned variables, this research aims to provide a deeper understanding of the intricate dynamics that influence the equilibrium of budgets and the fiscal stability within government operations. To assess the impact of these factors, the period from 2014 to 2023 underwent rigorous statistical analysis. Utilizing the ordinary least squares method, we aimed to scrutinize how these variables interacted with the budget deficit. The findings from this comprehensive study unveil a noteworthy pattern: revenues from natural resources and taxes, in conjunction with economic growth, exhibit an adverse correlation with the budget deficit. Conversely, government subsidies and general expenditures display a tendency to elevate the budget deficit within the government's fiscal framework.

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Section: Introductionmentioning

confidence: 99%

Unraveling the Dynamics of Budget Deficit Determinants in Afghanistan

Nasir Amiri,

Mohammadzai

2023

Integr. J. Res. Arts Humanities

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“…Fiscal policy in advanced economies lags inflation decisions, at least in theory, because seigniorage revenues have little influence on monetary policy (Woodford, 2001). Milo (2012) uses a quantitative economic model to confirm that there is a positive relationship between government deficit financing in Albania, Bulgaria, and Romania and monetary base expansion. They also believe that fiscal imbalances are one of the main causes of money printing and inflation in these countries.…”

Section: Introductionmentioning

confidence: 99%

“…They also believe that fiscal imbalances are one of the main causes of money printing and inflation in these countries. From 1985to 2012, Nguyen (2015 studied the impact of fiscal deficits and the extensive M2 monetary base and inflation in Asian countries such as Indonesia, Thailand, Bangladesh, the Philippines, Malaysia, Sri Lanka, Cambodia, Pakistan, and Vietnam, where interest rates and government spending were all sources of inflation with statistical significance. Honohan and Lane (2003) used several regression models to describe the annual inflation gap in the euro area from 1999 to 2001.…”

Section: Introductionmentioning

confidence: 99%

Analysis of the Effect of Currency Exchange Rate, Broad Money (M3) and Oil Prices on Inflation in India

Sharma

Dahiya

2023

IJEFI

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The main goal of any government is to keep the inflation rate low and generally constant. However, the economy is threatened by unbridled inflation. Therefore, it is important to understand the factors that affect inflation rates. Information on consumer price index, inflation rate, exchange rate and money supply has been collected from secondary data sources for India. Vector autocorrelation model (VECM) is used for data analysis. In addition, Lagrange multiplier test and Jarque-Bera test were used to determine whether the relationships of the variables are normal. The results showed a short run relationship between inflation and exchange rates. In the long run, there is a poor relationship between the two. Due to the absence of one of the criteria, the VECM cannot demonstrate long-run causality between the two circumstances. The results show that none of the lagged values of broad money are interesting.

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“…Consensus on the problem of fiscal deficit and its effect on key economic fundamentals like inflation and growth appears to be a distant reality. Whilst much attention has been given to the magnitude and direction of the relationship between fiscal deficit and selected economic fundamentals, the question of interaction variables mediating the relationship has virtually been neglected (Eita et al 2021;Kaur 2018;Olubiyi and Bolarinwa 2018). In this study, we consider the effect of money growth and general public consumption as selected mediators in the relationship among fiscal deficit, inflation and growth within the context of the West African Monetary Zone.…”

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confidence: 99%

The Mediating Effect of Money Growth And General Public Consumption In The Fiscal Deficit-Inflation-Growth Nexus of The West African Monetary Zone: A Multilevel Structural Model Approach

Ayesu¹,

Olaomi²

2021

Preprint

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The effect of fiscal deficit on inflation and growth, has been a highly contested issue in economics. Studies on the issue generally have sought to ascertain whether deficit in the fiscal balance has positive or negative effect on inflation and/or growth, neglecting the question of mediating variables in the process. In this study, we consider the consequences of selected mediating variables, money growth and general public consumption, in the context of the relationship among fiscal deficit, inflation and growth in the case of the West African Monetary Zone. The study is based on Multilevel Structural Model (1, 1, 1) within the framework of dynamic structural equation model. We found that when the relationship between inflation and fiscal deficit is mediated by growth of money, it does not show any statistical credibility, thus, member-countries are not prone to finance deficits by expanding growth of money. On the other hand, general public consumption is a statistically credible mediator between fiscal deficit and growth, but its effect is negative on growth. This implies that increased general public consumption occasioned by increased fiscal deficit is counter-productive to growth outcomes in the sub-region.

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The Impact of Fiscal Deficit on Inflation in Namibia

Cited by 4 publications

References 18 publications

Unraveling the Dynamics of Budget Deficit Determinants in Afghanistan

Unraveling the Dynamics of Budget Deficit Determinants in Afghanistan

Analysis of the Effect of Currency Exchange Rate, Broad Money (M3) and Oil Prices on Inflation in India

The Mediating Effect of Money Growth And General Public Consumption In The Fiscal Deficit-Inflation-Growth Nexus of The West African Monetary Zone: A Multilevel Structural Model Approach

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