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Impact of Budget Deficit on Inflation in Zimbabwe

Author

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  • Albert Makochekanwa

    (USAID Southern Africa Trade Hub, Gaborone)

Abstract

The Zimbabwean economy is one of the countries that once experienced a relatively high fiscal deficit for a prolonged period which resulted in a hyper inflationary environment. This paper examines the deficit-inflation nexus in the Zimbabwean economy and establishes the causal link that runs from the budget deficit to the inflation rate using Johansen (1991, 1995) cointegration technique over the period 1980 to 2005. Due to massive monetization of the budget deficit, significant inflationary effects are found for increases in the budget deficit.

Suggested Citation

  • Albert Makochekanwa, 2011. "Impact of Budget Deficit on Inflation in Zimbabwe," Economic Research Guardian, Mutascu Publishing, vol. 1(2), pages 49-59, December.
    • Handle: RePEc:wei:journl:v:1:y:2011:i:2:p:49-59
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    Cited by:

    1. Ebenezer A. OLUBIYI & Michael A. BOLARINWA, 2018. "Fiscal deficit and inflation rate in selected African Regional Blocs: A comparative analysis," Turkish Economic Review, EconSciences Journals, vol. 5(1), pages 89-101, March.
    2. Ebenezer A. OLUBIYI & Michael A. BOLARINWA, 2018. "Fiscal deficit and inflation rate in selected African Regional Blocs: A comparative analysis," Turkish Economic Review, KSP Journals, vol. 5(1), pages 89-101, March.
    3. Chakraborty, Lekha & Varma, Kushagra Om, 2015. "Efficacy of New Monetary Framework and Determining Inflation in India: An Empirical Analysis of Financially Deregulated Regime," Working Papers 15/153, National Institute of Public Finance and Policy.
    4. Saungweme Talknice & Odhiambo Nicholas M., 2021. "Public debt and inflation dynamics: Empirical evidence from Zimbabwe," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 7(2), pages 14-30, December.
    5. Clement Olalekan Olaniyi, 2020. "Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 123-140, May.
    6. Jalil, Abdul & Tariq, Rabbia & Bibi, Nazia, 2014. "Fiscal deficit and inflation: New evidences from Pakistan using a bounds testing approach," Economic Modelling, Elsevier, vol. 37(C), pages 120-126.
    7. Gurleen Kaur, 2021. "Inflation and Fiscal Deficit in India: An ARDL Approach," Global Business Review, International Management Institute, vol. 22(6), pages 1553-1573, December.
    8. Joel Hinaunye Eita & Victoria Manuel & Erwin Naimhwaka & Florette Nakusera, 2021. "The Impact of Fiscal Deficit on Inflation in Namibia," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(1), pages 141-164.

    More about this item

    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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