IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Political Instability, Inflation Tax and Asset Substitution in Burundi

  • Janvier D. Nkurunziza

    ()

    (United Nations Economic Commission for Africa
    Texas A&M University, Kingsville, College of Agriculture & Human Sciences)

Registered author(s):

    The paper shows that civil war in Burundi in the 1990s has provoked an unprecedented decline in government revenue. Both foreign aid transfers and revenue from domestic sources dried up, inducing the government to rely more on inflation tax. Using quarterly data covering the period from 1980:1 to 2002:4 to measure the sensitivity of money demand to inflation we find that the long-run semi-elasticity of inflation to real money in circulation trebled between the pre-war to the war period. The remarkable increase of the semi-elasticity reflects what is known in the literature as "flight from domestic currency," whereby domestic currency is substituted for less liquid assets. By shedding light on the behavior of the demand for real money amidst persistent political and economic instability, this paper illustrates the limits of inflation tax as a dependable source of government revenue.

    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.jadafea.com/vol7/
    Download Restriction: no

    Article provided by African Finance and Economic Association in its journal Journal of African Development.

    Volume (Year): 7 (2005)
    Issue (Month): 1 ()
    Pages: 42-72

    as
    in new window

    Handle: RePEc:afe:journl:v:7:y:2005:i:1:p:42-72
    Contact details of provider: Web page: http://www.jadafea.com/

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

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

    When requesting a correction, please mention this item's handle: RePEc:afe:journl:v:7:y:2005:i:1:p:42-72. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mwangi wa Githinji)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.