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Fiscal Deficits, Monetary Reform and Inflation: The Case of Romania

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Author Info

  • Budina, Nina

    (Tinberge Institute Amsterdam, The Netherlands - CERGE-EI Prague)

  • Wijnbergen, Sweder van

    (University of Amsterdam)

Abstract

The main objective of this paper is to explain the phenomena of persistent inflation in Romania through the use of a simple empirical model which highlights the links between inflation and the government budget deficit. We discuss the importance of using a proper definition of the public sector when calculating the public sector deficit and illustrate the impact of using different measures of public sector deficits on the assessment of consistency between monetary and fiscal policy. We then discuss the effect of switching to market interest rates on domestic debt as well as the impact of real exchange rate depreciation and financial sector reform on the financeable deficit and the required deficit reduction for given inflation targets.

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File URL: http://www.ihs.ac.at/publications/eco/east/ro-37.pdf
File Function: First version, 1996
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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series East European Series with number 37.

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Length: 36 pages
Date of creation: Sep 1996
Date of revision:
Handle: RePEc:ihs:ihsrop:37

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Related research

Keywords: Monetary and Fiscal Policy; Inflation; Romania; Real Exchange Rate Dynamics;

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