IDEAS home Printed from https://ideas.repec.org/a/eaa/aeinde/v7y2007i1_3.html
   My bibliography  Save this article

Domestic Debt, Inflation And Economic Crises: A Panel Cointegration Application To Emerging And Developed Economies

Author

Listed:
  • BILDIRICI, Melike

    ()

  • ERSIN, Ozgur Omer

    ()

Abstract

The paper aims to investigate the economic relationship between inflation and domestic debt. In countries that experience high inflation, the inflationary process fed on increasing costs of domestic debt. As a result, the increasing debt to GDP ratios led these countries to borrow at higher interest rates and with lower maturity rates. The paper aims to divide countries into three groups. First group consists of Mexico, Turkey and Brazil; countries with high inflation experiences which result in increasing costs of domestic debt. Second group consists of Belgium, Canada and Japan, low inflation rates, low costs of borrowing. Third group consists of Portugal, Greece and Spain, countries with low inflation, high borrowing with low costs of borrowing and fiscal discipline. It is observed that, increasing costs of borrowing is epidemic to those with Non-Ricardian fiscal policies. As a result, it is not the rate of domestic debt/GDP ratio but the cost of borrowing and active fiscal regimes that lessens the immunity of emerging economies to the economic crises. Another important result that cannot be avoided is the fact that, FMOLS and DOLS methods followed in the study resulted in similar estimates for some countries, whereas we also observe very different estimates for others.

Suggested Citation

  • BILDIRICI, Melike & ERSIN, Ozgur Omer, 2007. "Domestic Debt, Inflation And Economic Crises: A Panel Cointegration Application To Emerging And Developed Economies," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 7(1).
  • Handle: RePEc:eaa:aeinde:v:7:y:2007:i:1_3
    as

    Download full text from publisher

    File URL: http://www.usc.es/economet/journals1/aeid/aeid713.pdf
    Download Restriction: Access restricted to subscribers. Free on line subscription for universities from low income countries. More information at http://www.usc.es/economet/info.htm

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Woodford, Michael, 2001. "Fiscal Requirements for Price Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(3), pages 669-728, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:rss:jnljee:v3i3p6 is not listed on IDEAS
    2. Zied SAYARI & Rima LAJNAF, 2017. "Inflation targeting and volatility: Panel evidence," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 57-68, Spring.
    3. Lim Chia Yien & Hussin Abdullah & Muhammad Azam, 2017. "Granger Causality Analysis between Inflation, Debt and Exchange Rate: Evidence from Malaysia," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(1), pages 189-196, January.
    4. Melike Bildirici & Özgür Ömer ERS?N & Elçin Aykaç ALP, 2008. "An Empirical Analysis of Debt Policies, External Dependence, Inflation and Crisis in the Ottoman Empire and Turkey: 1830-2005 Period," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(2), pages 79-100.
    5. José Augusto Lopes da Veiga & Alexandra Ferreira-Lopes & Tiago Neves Sequeira, 2016. "Public Debt, Economic Growth and Inflation in African Economies," South African Journal of Economics, Economic Society of South Africa, vol. 84(2), pages 294-322, June.

    More about this item

    Keywords

    FTPL; Ricardian Equivalence; inflation and public debt; Panel Cointegration; Panel VAR; Panel VEC; FMOLS; DOLS;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eaa:aeinde:v:7:y:2007:i:1_3. 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: (M. Carmen Guisan). General contact details of provider: http://www.usc.es/economet/eaa.htm .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.