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Deficit financing in developing countries: Applications and consequences

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  • Hasan, Zubair

Abstract

Budgetary deficits and adverse external payments have emerged as major public policy concerns in recent times. The purpose of this paper is to discuss briefly various aspects and forms of deficit financing as modern economies increasingly use it to address these concerns. Historical evidence shows that controlled deficit finance can be a useful tool to mobilize physical resources for economic development. Borrowings from the IMF are available to meet deficits during financial turmoil and chronic balance of payments deficits for country bailout. The paper warns of the dangers of reckless indulgence in deficit financing, internal or external - and indicates precautions to avoid the pitfalls. It puts, presumably for the first time deficit finance for various purposes from different sources in a single framework.

Suggested Citation

  • Hasan, Zubair, 2019. "Deficit financing in developing countries: Applications and consequences," MPRA Paper 94349, University Library of Munich, Germany, revised Feb 2019.
  • Handle: RePEc:pra:mprapa:94349
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    File URL: https://mpra.ub.uni-muenchen.de/94349/1/MPRA_paper_94349.pdf
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    References listed on IDEAS

    as
    1. Zubair Hasan, 2016. "Risk-Sharing: The Sole Basis of Islamic Finance? Time for a Serious Rethink المشاركة في المخاطر: الأساس الوحيد للتمويل الإسلامي؟ حان الوقت لإعادة التفكير الجدي في الموضوع," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 29(2), pages 23-36, January.
    2. Hasan, Zubair, 2002. "The 1997-98 Financial Crisis In Malaysia: Causes, Response, And Results," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 9, pages 1-16.
    3. Hasan, Zubair, 2003. "The 1997-98 Financial Crisis In Malaysia: Causes, Response, And Results − A Rejoinder," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 10, pages 45-53.
    Full references (including those not matched with items on IDEAS)

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    1. Hasan, Zubair, 2018. "Deficit finance and developing economies:Implications and results," MPRA Paper 89818, University Library of Munich, Germany.
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    More about this item

    Keywords

    Deficit financing; Economic development; International Monetary Fund (IMF) conditionality; Arms race;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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