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Fiscal Deficit and Inflation: An empirical analysis for India

Author

Listed:
  • Aviral Kumar Tiwari

    (ICFAI University, Tripura)

  • A. P. Tiwari

    (Department of Economics, Vidyant Hindu College, University of Lucknow, Lucknow)

Abstract

This study examines the linkage between fiscal deficit and inflation in India. The main objective of this study is to examine the factors that are responsible for increasing fiscal deficit in India, by taking into account all factors that can affect the status of fiscal deficit. The study finds that inflation is not at all cause of fiscal deficit. However, government expenditure and money supply are found to be important determinants of mounting fiscal deficit.

Suggested Citation

  • Aviral Kumar Tiwari & A. P. Tiwari, 2011. "Fiscal Deficit and Inflation: An empirical analysis for India," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(42), pages 131-158, December.
    • Handle: RePEc:rej:journl:v:14:y:2011:i:42:p:131-158
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    References listed on IDEAS

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    2. Momi Dahan, 1998. "The Fiscal Effects of Monetary Policy," IMF Working Papers 1998/066, International Monetary Fund.
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    4. Mohammad Aslam Chaudhary & Naved Ahmad, 1995. "Money Supply, Deficit, and Inflation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 945-956.
    5. Julio H. G. Olivera, 1967. "Money, prices and fiscal lags: a note on the dynamics of inflation," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 20(82), pages 258-267.
    6. Preston J. Miller, 1983. "Higher deficit policies lead to higher inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 7(Win).
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    8. George Hondroyiannis & Evangelia Papapetrou, 1997. "Are budget deficits inflationary? A cointegration approach," Applied Economics Letters, Taylor & Francis Journals, vol. 4(8), pages 493-496.
    9. Fischer, Stanley, 1989. "The economics of the government budget constraint," Policy Research Working Paper Series 224, The World Bank.
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    Cited by:

    1. Gurleen Kaur, 2021. "Inflation and Fiscal Deficit in India: An ARDL Approach," Global Business Review, International Management Institute, vol. 22(6), pages 1553-1573, December.
    2. Bello, Abdulmajeed Kumo & Joshua Adams Ndako & Yusuf, Fadimah & Amodu Amina Ejura, 2023. "Fiscal Dominance and Monetary Policy Efficacy in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(10), pages 857-877, October.
    3. Nkemjika Nwosu & Uduakobong Sammy Inam & Paul Atanda Orebiyi, 2024. "Fiscal Deficit Inflation Nexus in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(7), pages 3274-3287, July.

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    More about this item

    Keywords

    Budget Deficit; Inflation; Money supply.;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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