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Further Evidence on the Relationship between Federal Government Debt and Inflation


  • Hafer, R W
  • Hein, Scott E


Does an increase in the federal debt cause inflation? Gerald P. Dwyer (1982), us ing a par value measure of debt, finds no such causal link. W. Michae l Cox (1985), using a market value measure, finds that increases in d ebt produce higher inflation rates. The authors reconcile these resul ts by demonstrating that failure to capture the interest rate effects inherent in the market value measure accounts for the finding that d ebt "causes" inflation. Incorporating interest rates into their test equations, using the market value series, leads them to conclude th at increases in federal debt do not cause higher rates of inflation. Copyright 1988 by Oxford University Press.

Suggested Citation

  • Hafer, R W & Hein, Scott E, 1988. "Further Evidence on the Relationship between Federal Government Debt and Inflation," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 239-251, April.
  • Handle: RePEc:oup:ecinqu:v:26:y:1988:i:2:p:239-51

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    Cited by:

    1. Chowdhury, Khorshed, 2004. "Deficit Financing in LDCs: Evidence From South Asia," Economics Working Papers wp04-18, School of Economics, University of Wollongong, NSW, Australia.
    2. Solveen, Ralph, 1996. "Geldpolitik und Staatsverschuldung - welche Rolle spielt die Unabhängigkeit der Notenbank?," Kiel Working Papers 750, Kiel Institute for the World Economy (IfW).
    3. Darrat, Ali F & Glascock, John L, 1993. "On the Real Estate Market Efficiency," The Journal of Real Estate Finance and Economics, Springer, vol. 7(1), pages 55-72, July.
    4. Alberto Carrasquilla, 1996. "Dimensiones Fiscales De Una Inflación Moderada: El Caso Colombiano," BORRADORES DE ECONOMIA 002357, BANCO DE LA REPÚBLICA.
    5. Carrasquilla, Alberto, 1996. "Dimensiones fiscales de una inflación moderada: el caso colombiano," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34264, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

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