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Impact of Inflation on Fiscal Deficits in the Bangladesh Economy

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  • MD. AKHTAR HOSSAIN

    (La Trobe University)

Abstract

This paper investigates the two-way relationship between fIScal deficits and inflation in Bangladesh's economy. A dynamic model containing inflation and equations concerning government revenue and development expenditures has been constructed and estimated, using quarterly data over the 1974(11)-1983(11) period. Estimates of adjustment parameters support the basic hypothesis that in Bangladesh government expenditures adjust themselves to inflation more rapidly than government revenues and increase the size of fiscal deficits during inflation. An implication of this result is that inflation-induced fiscal deficits (if financed by money creation) may generate a self-sustaining inflationary process in a developing country like Bangladesh.

Suggested Citation

  • Md. Akhtar Hossain, 1987. "Impact of Inflation on Fiscal Deficits in the Bangladesh Economy," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 26(2), pages 179-200.
    • Handle: RePEc:pid:journl:v:26:y:1987:i:2:p:179-200
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    File URL: http://www.pide.org.pk/pdf/PDR/1987/Volume2/179-200.pdf
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    Cited by:

    1. Abdul Qadir Patoli & Tayyab Zarif & Nadeem A. Syed, 2012. "Impact Of Inflation On Taxes In Pakistan: An Empirical Study Of 2000-2010 Period," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 8(2), pages 8-4.
    2. Narayan Sethi & Saileja Mohanty & Sanhita Sucharita & Nanthakumar Loganathan, 2020. "Tax Reform And Economic Growth Nexus In India: Evidence From The Cointegration And Rolling-Window Causality," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(06), pages 1699-1725, December.
    3. Abdul Qadir Patoli & Tayyab Zarif & Nadeem A.Syed, 2012. "Impact Of Inflation On Taxes In Pakistan: An Empirical Study Of 2000-2010 Period," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 8(2), pages 31-41.

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