This paper studies the patterns of inflation skewness in 56 countries. Monthly data suggests that inflation is positively skewed. We investigate linkages between skewness and non-linearity, showing that concavity (convexity) will lead to negative (positive) skewness if the independent variable is symmetrically distributed. We construct a public finance model for a developing country that uses inflation tax and external borrowing as the residual means for fiscal financing. The model predicts a convex dependency of inflation on output, where inflation skewness depends positively on inflation volatility, and external debt difficulties magnify the skewness. We conclude the paper with an assessment of the patterns of inflation between 1979-1993 for the 56 countries. Overall, the patterns are consistent with the predictions of the model.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4837.
Length: Date of creation: Aug 1994 Date of revision: Handle: RePEc:nbr:nberwo:4837
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Find related papers by JEL classification: F34 - International Economics - - International Finance - - - International Lending and Debt Problems F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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