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Deficit and External Debt Effects on Money and Inflation in Brazil and Mexico: Some Evidence

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  • Bharat R. Koluri
  • Demetrios S. Giannaros

Abstract

The purpose of this study is to examine the monetarist propositions regarding the effects of budget deficits, external debt, and money growth on inflation in the cases of Brazil and Mexico. To this end, a money growth equation and a price equation have been specified and estimated for empirical analysis. In general, it is concluded that the government budget deficit is not a determinant of money supply growth or of inflation. External debt is found to be a significant factor of money growth. Also, the results suggest a significant effect of money supply growth on inflation.

Suggested Citation

  • Bharat R. Koluri & Demetrios S. Giannaros, 1987. "Deficit and External Debt Effects on Money and Inflation in Brazil and Mexico: Some Evidence," Eastern Economic Journal, Eastern Economic Association, vol. 13(3), pages 243-248, Jul-Sep.
    • Handle: RePEc:eej:eeconj:v:13:y:1987:i:3:p:243-248
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume13/V13N3P243_248.pdf
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    References listed on IDEAS

    as
    1. Hamburger, Michael J. & Zwick, Burton, 1981. "Deficits, money and inflation," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 141-150.
    2. Niskanen, William A., 1978. "Deficits, government spending, and inflation : What is the evidence?," Journal of Monetary Economics, Elsevier, vol. 4(3), pages 591-602, August.
    3. Kohli, Ulrich R. & McKibbin, Warwick J., 1982. "Are government deficits the prime cause of inflation?," Journal of Policy Modeling, Elsevier, vol. 4(3), pages 279-309, November.
    4. Bruno S. Frey & Werner W. Pommerehne & Friedrich Schneider, 1983. "Are We All Monetarists Now? An Empirical Inquiry," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 6(1), pages 89-96, September.
    5. Barro, Robert J, 1978. "Unanticipated Money, Output, and the Price Level in the United States," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 549-580, August.
    6. Darby, Michael R. & Lothian, James R. & Gandolfi, Arthur E. & Schwartz, Anna J., 1983. "The International Transmission of Inflation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226136417.
    7. McMillin, W. Douglas & Beard, Thomas R., 1982. "Deficits, money and inflation : Comment," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 273-277.
    8. Hamburger, Michael J. & Zwick, Burton, 1982. "Deficits, money and inflation : Reply," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 279-283.
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    Cited by:

    1. M. Faizul Islam, 1998. "Brazil's twin deficits: An empirical examination," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(2), pages 121-128, June.
    2. Mesbah Fathy Sharaf & Abdelhalem Mahmoud Shahen & Badr Abdulaziz Binzaid, 2024. "Asymmetric and Nonlinear Foreign Debt–Inflation Nexus in Brazil: Evidence from NARDL and Markov Regime Switching Approaches," Economies, MDPI, vol. 12(1), pages 1-20, January.

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