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The Effects Of Fiscal And Monetary Discipline On Budgetary Outcomes

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Author Info
BILIN NEYAPTI
SECIL OZGUR

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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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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1465-7287.2007.00034.x
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Publisher Info
Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 25 (2007)
Issue (Month): 2 (04)
Pages: 146-155
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Handle: RePEc:bla:coecpo:v:25:y:2007:i:2:p:146-155

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alesina, Alberto & Gatti, Roberta, 1995. "Independent Central Banks: Low Inflation at No Cost?," American Economic Review, American Economic Association, vol. 85(2), pages 196-200, May. [Downloadable!] (restricted)
  2. Waller, Christopher J & Walsh, Carl E, 1996. "Central-Bank Independence, Economic Behavior, and Optimal Term Lengths," American Economic Review, American Economic Association, vol. 86(5), pages 1139-53, December. [Downloadable!] (restricted)
  3. Joshua Aizenman & Ricardo Hausmann, 1995. "The Impact of Inflation on Budgetary Discipline," NBER Working Papers 5338, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. von Hagen, Jurgen & Harden, Ian J., 1995. "Budget processes and commitment to fiscal discipline," European Economic Review, Elsevier, vol. 39(3-4), pages 771-779, April. [Downloadable!] (restricted)
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  5. Ozkan, F Gulcin & Sibert, Anne & Sutherland, Alan, 1997. "Monetary Union, Entry Conditions and Economic Reform," CEPR Discussion Papers 1720, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May. [Downloadable!] (restricted)
  7. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, Oxford University Press, vol. 6(3), pages 353-98, September.
  8. Eijffinger, S-C-W & de Haan, J, 1996. "The Political Economy of Central-Bank Independence," Princeton Studies in International Economics 19, International Economics Section, Departement of Economics Princeton University,.
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This page was last updated on 2008-10-3.

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