Fiscal Explanations for Inflation: Any Evidence from Transition Economies?

Economics of Planning 35, 239-316, 12/2000; DOI: 10.2139/ssrn.250531

Posted: 7 Sep 2014

See all articles by Jukka Pirttila

Jukka Pirttila

United Nations - World Institute for Development Economics Research (UNU/WIDER); Tampere University of Technology

Tuomas Komulainen

Mandatum Stockbrokers Ltd. - Sampo Group

Date Written: 2000

Abstract

Recent arguments, motivated partly by the new fiscal theory of price level, suggest that fiscal deficits undermine price stability in transition economies. This paper addresses these claims by examining vector-autoregressive models of inflation for three transition economies (Bulgaria, Romania and Russia). The results indicate that fiscal deficits have increased inflation in Bulgaria and Romania but not in the case of Russia. In Bulgaria and Romania, money aggregates and exchange rate have also been more influential to inflation than fiscal deficits. The analysis based on this method therefore suggests that while fiscal deficits have some influence on inflation, monetary factors mostly determine inflation in these three countries.

Keywords: fiscal policy, inflation, transition economies, vector autoregressive models

Suggested Citation

Pirttila, Jukka and Komulainen, Tuomas, Fiscal Explanations for Inflation: Any Evidence from Transition Economies? (2000). Economics of Planning 35, 239-316, 12/2000; DOI: 10.2139/ssrn.250531 . Available at SSRN: https://ssrn.com/abstract=2492521

Jukka Pirttila (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

Tampere University of Technology ( email )

P.O. 541, Korkeakoulunkatu 8 (Festia building)
Tampere, FI-33101
Finland

Tuomas Komulainen

Mandatum Stockbrokers Ltd. - Sampo Group ( email )

Finland

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