The Nexus Between Public Expenditure And Inflation In The Mediterranean Countries
AbstractThe aim of this article is to assess the empirical evidence of the nexus between public expenditure and inflation for the Mediterranean countries during the period 1970-2009, using a time-series approach. After a brief introduction, a concise survey of the economic literature on this issue is shown, before discussing the data and introducing some econometric techniques. Stationarity tests reveal, generally, that public expenditure/GDP ratio is a I(1) process, while prices index is a I(2) process. Moreover, a long-run relationship between the share of public expenditure and inflation is found for Cyprus, France, Greece and Portugal. Furthermore, Granger causality tests results show a short-run evidence of a directional flow from inflation to expenditure for Cyprus, France and Spain; and of a bidirectional flow for Italy, Malta and Portugal. Some notes on the policy implications of our empirical results conclude the paper.
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Bibliographic InfoArticle provided by ASERS Publishing in its journal Theoretical and Practical Research in Economic Fields.
Volume (Year): II (2011)
Issue (Month): 1 (June)
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Web page: http://www.asers.eu/journals/tpref.html
public expenditure; inflation; Mediterranean countries; time series; unit root; cointegration; causality.;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
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