Author Description

Empirical Studies Have Had Little Success In Finding A Statistically Significant Relationship Between Fiscal Deficits And Inflation In Broad Cross-country Panels. This Paper Provides New Econometric Estimates For A Panel Of 23 Emerging Market Countries During 1970-2000. Unlike Previous Studies, We Allow For A Rich Dynamic Specification And Focus On The Long-run Relationship Between The Two Variables Controlling For Differences In The Inflation Tax Base. We Find That A 1 Percentage Point Reduction In The Ratio Of Fiscal Deficit To Gdp Typically Lowers Long-run Inflation By 1½ To 6 Percentage Points, Depending On The Size Of The Inflation Tax Base. Marco Terrones, Luis Catão. Bibliographic Level Mode Of Issuance: Monograph English