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Fiscal Deficit and Inflation: An empirical analysis for India


  • Aviral Kumar Tiwari

    () (ICFAI University, Tripura)

  • A. P. Tiwari

    () (Department of Economics, Vidyant Hindu College, University of Lucknow, Lucknow)


This study examines the linkage between fiscal deficit and inflation in India. The main objective of this study is to examine the factors that are responsible for increasing fiscal deficit in India, by taking into account all factors that can affect the status of fiscal deficit. The study finds that inflation is not at all cause of fiscal deficit. However, government expenditure and money supply are found to be important determinants of mounting fiscal deficit.

Suggested Citation

  • Aviral Kumar Tiwari & A. P. Tiwari, 2011. "Fiscal Deficit and Inflation: An empirical analysis for India," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(42), pages 131-158, December.
  • Handle: RePEc:rej:journl:v:14:y:2011:i:42:p:131-158

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    References listed on IDEAS

    1. O. Cevdet Akcay & C. Emre Alper & Suleyman Ozmucur, 2001. "Budget Deficit, Inflation and Debt Sustainability: Evidence from Turkey(1970-2000)," Working Papers 2001/12, Bogazici University, Department of Economics.
    2. Mohammad Aslam Chaudhary & Naved Ahmad, 1995. "Money Supply, Deficit, and Inflation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 945-956.
    3. George Hondroyiannis & Evangelia Papapetrou, 1997. "Are budget deficits inflationary? A cointegration approach," Applied Economics Letters, Taylor & Francis Journals, vol. 4(8), pages 493-496.
    4. Momi Dahan, 1998. "The Fiscal Effects of Monetary Policy," IMF Working Papers 98/66, International Monetary Fund.
    5. Tayyeb Shabbir & Ayaz Ahmed, 1994. "Are Government Budget Deficits Inflationary? Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(4), pages 955-967.
    6. Sadia Tahir, 2006. "Core Inflation Measures for Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 319-342.
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    More about this item


    Budget Deficit; Inflation; Money supply.;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus


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