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Inflation and the size of government

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  • Song Han
  • Casey B. Mulligan

Abstract

It is commonly supposed in public and academic discourse that inflation and big government are related. We show that economic theory delivers such a prediction only in special cases. As an empirical matter, inflation is significantly positively related to the size of government mainly when periods of war and peace are compared. We find a weak positive peacetime time series correlation between inflation and the size of government and a negative cross-country correlation of inflation with non-defense spending.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2002-1.

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Date of creation: 2002
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Handle: RePEc:fip:fedgfe:2002-1

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Keywords: Inflation (Finance);

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  12. Herschel I. Grossman, 1988. "The Political Economy of War Debts and Inflation," NBER Working Papers 2743, National Bureau of Economic Research, Inc.
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  18. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  19. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Social security in theory and practice (I): Facts and political theories," Economics Working Papers 384, Department of Economics and Business, Universitat Pompeu Fabra.
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Cited by:
  1. Patrick Enu & Emmanuel Dodzi K. Havi, 2014. "Macroeconomic Determinants of Inflation In Ghana: A Co integration Approach," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(7), pages 95-110, July.
  2. Eggoh, Jude C. & Khan, Muhammad, 2014. "On the nonlinear relationship between inflation and economic growth," Research in Economics, Elsevier, vol. 68(2), pages 133-143.

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