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On the low-frequency relationship between public deficits and inflation

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  • Kliem, Martin
  • Kriwoluzky, Alexander
  • Sarferaz, Samad

Abstract

We estimate the low-frequency relationship between fiscal deficits and inflation and pay special attention to its potential time variation by estimating a time-varying VAR model for U.S. data from 1900 to 2011. We find the strongest relationship neither in times of crisis nor in times of high public deficits, but from the mid-1960s up to 1980. Our results suggest that the low-frequency relationship between fiscal deficits and inflation is strongly related to the conduct of monetary policy and its interaction with fiscal policy after World War II. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Papers with number 12/2013.

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Date of creation: 2013
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Handle: RePEc:zbw:bubdps:122013

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Keywords: Time-Varying VAR; Inflation; Public Deficits;

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Cited by:
  1. Francesco Bianchi & Cosmin Ilut, 2014. "Monetary/Fiscal Policy Mix and Agents' Beliefs," NBER Working Papers 20194, National Bureau of Economic Research, Inc.
  2. De Graeve, Ferre & Queijo von Heideken, Virginia, 2013. "Identifying Fiscal Inflation," Working Paper Series 273, Sveriges Riksbank (Central Bank of Sweden).
  3. Amir-Ahmadi, Pooyan & Matthes, Christian & Wang, Mu-Chun, 2014. "Drifts, Volatilities, and Impulse Responses Over the Last Century," Working Paper 14-10, Federal Reserve Bank of Richmond.

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