The Effects Of Fiscal And Monetary Discipline On Budgetary Outcomes
Abstract"This article extends the model of Von Hagen and Harden that analyzed the impact of fiscal discipline on budgetary outcomes. We modify the model by adding monetary discipline to interact with fiscal discipline in order to analyze the effects of both on budgetary outcomes. The model predicts that while both inflation and budget deficits are negatively associated with fiscal discipline, they may be positively associated with monetary discipline, proxied by central bank independence. This result obtains due to optimizing agents internalizing the burden of spending: inflation. Although not conclusive due to data limitations, empirical findings also support these predictions. "("JEL "D73, E58, H61, H72) Copyright 2007 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Contemporary Economic Policy.
Volume (Year): 25 (2007)
Issue (Month): 2 (04)
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Other versions of this item:
- Bilin Neyapti, 2003. "The Effects Of Fiscal And Monetary Discipline On Budgetary Outcomes," Working Papers 2003/1, Turkish Economic Association.
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
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