Advanced Search
MyIDEAS: Login

Fiscal Dominance and Inflation in the Democratic Republic of the Congo

Contents:

Author Info

  • Jean-Claude Nachega
Registered author(s):

    Abstract

    This paper examines the fiscal dominance hypothesis in the Democratic Republic of the Congo (DRC) during 1981-2003, using multivariate cointegration analysis and vector errorcorrection modeling. Empirical results point to strong and statistically significant long-run relationships between budget deficits and seigniorage, and between money creation and inflation. The long-run inflationary impact of budget deficits is robust to the inclusion of output growth or velocity in the inflation and monetary growth equations. The paper offers some policy recommendations for long-term price stability in the DRC.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18633
    Download Restriction: no

    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/221.

    as in new window
    Length: 64
    Date of creation: 01 Nov 2005
    Date of revision:
    Handle: RePEc:imf:imfwpa:05/221

    Contact details of provider:
    Postal: International Monetary Fund, Washington, DC USA
    Phone: (202) 623-7000
    Fax: (202) 623-4661
    Email:
    Web page: http://www.imf.org/external/pubind.htm
    More information through EDIRC

    Order Information:
    Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Caprio,Gerard & Honohan,Patrick & Stiglitz,Joseph E. (ed.), 2001. "Financial Liberalization," Cambridge Books, Cambridge University Press, number 9780521803694.
    2. Friedman, Milton, 1971. "Government Revenue from Inflation," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 846-56, July-Aug..
    3. Harberger, Arnold C, 1978. "A Primer on Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(4), pages 505-21, November.
    4. Ali Darrat, 2000. "Are budget deficits inflationary? A reconsideration of the evidence," Applied Economics Letters, Taylor and Francis Journals, vol. 7(10), pages 633-636.
    5. Stanley Fischer & Ratna Sahay & Carlos A. V�gh, 2002. "Modern Hyper- and High Inflations," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 837-880, September.
    6. Barth, James & Sickles, Robin & Wiest, Philip, 1982. "Assessing the impact of varying economic conditions on federal reserve behavior," Journal of Macroeconomics, Elsevier, vol. 4(1), pages 47-70.
    7. Barro, Robert J., 1978. "Comment from an unreconstructed Ricardian," Journal of Monetary Economics, Elsevier, vol. 4(3), pages 569-581, August.
    8. Luis Catão & Marco Terrones, 2003. "Fiscal Deficits and Inflation," IMF Working Papers 03/65, International Monetary Fund.
    9. Hamburger, Michael J. & Zwick, Burton, 1981. "Deficits, money and inflation," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 141-150.
    10. Sergio Nicoletti Altimari, 2001. "Does money lead inflation in the euro area?," Working Paper Series 063, European Central Bank.
    11. Woodford, Michael, 1995. "Price-level determinacy without control of a monetary aggregate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 1-46, December.
    12. Grier, Kevin B & Neiman, Howard E, 1987. "Deficits, Politics and Money Growth," Economic Inquiry, Western Economic Association International, vol. 25(2), pages 201-14, April.
    13. McMillin, W. Douglas & Beard, Thomas R., 1982. "Deficits, money and inflation : Comment," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 273-277.
    14. Jean-Claude Nachega, 2001. "Financial Liberalization, Money Demand, and Inflation in Uganda," IMF Working Papers 01/118, International Monetary Fund.
    15. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
    16. Ayca Tekin-Koru & Erdal Ozmen, 2003. "Budget deficits, money growth and inflation: the Turkish evidence," Applied Economics, Taylor and Francis Journals, vol. 35(5), pages 591-596.
    17. Peter J. Montiel, 1989. "Empirical Analysis of High-Inflation Episodes in Argentina, Brazil, and Israel," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 527-549, September.
    18. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    19. Click, Reid W, 1998. "Seigniorage in a Cross-Section of Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(2), pages 154-71, May.
    20. Alex Cukierman & Sebastian Edwards & Guido Tabellini, 1989. "Seigniorage and Political Instability," NBER Working Papers 3199, National Bureau of Economic Research, Inc.
    21. Metin, Kivilcim, 1998. "The Relationship between Inflation and the Budget Deficit in Turkey," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 412-22, October.
    22. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    23. Robert J. Barro, 1976. "Unanticipated Money Growth and Unemployment in the United States," Working Papers 234, Queen's University, Department of Economics.
    24. Herrendorf, Berthold, 1997. " Time Consistent Collection of Optimal Seigniorage: A Unifying Framework," Journal of Economic Surveys, Wiley Blackwell, vol. 11(1), pages 1-46, March.
    25. Dwyer, Gerald P, Jr, 1982. "Inflation and Government Deficits," Economic Inquiry, Western Economic Association International, vol. 20(3), pages 315-29, July.
    26. Allen, Stuart D. & Smith, Michael D., 1983. "Government borrowing and monetary accommodation," Journal of Monetary Economics, Elsevier, vol. 12(4), pages 605-616, November.
    27. Sowa, Nii Kwaku, 1994. "Fiscal deficits, output growth and inflation targets in Ghana," World Development, Elsevier, vol. 22(8), pages 1105-1117, August.
    28. Giannaros, Demetrios S. & Kolluri, Bharat R., 1985. "Deficit spending, money, and inflation: Some international empirical evidence," Journal of Macroeconomics, Elsevier, vol. 7(3), pages 401-417.
    29. Ghartey, Edward E., 2001. "Macroeconomic instability and inflationary financing in Ghana," Economic Modelling, Elsevier, vol. 18(3), pages 415-433, August.
    30. De Haan, Jakob & Zelhorst, Dick, 1990. "The impact of government deficits on money growth in developing countries," Journal of International Money and Finance, Elsevier, vol. 9(4), pages 455-469, December.
    31. Juselius, Katarina, 1992. "Domestic and foreign effects on prices in an open economy: The case of Denmark," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 401-428, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:05/221

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.