IDEAS home Printed from https://ideas.repec.org/p/csa/wpaper/2004-19.html

How long can inflation tax compensate for the loss of government revenue in war economies? Evidence From Burundi

Author

Listed:
  • Janvier D. Nkurunziza

Abstract

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 translates what is known in the literature as economic agents. .flight from domestic currency., a strategy that limits the governments capacity to use inflation tax to compensate for the loss in more traditional revenue sources. Shedding light on the behaviour of the demand for real money amidst persistent political and economic instability, illustrates the limits of using inflation and money creation as a dependable source of government revenue.

Suggested Citation

  • Janvier D. Nkurunziza, 2004. "How long can inflation tax compensate for the loss of government revenue in war economies? Evidence From Burundi," CSAE Working Paper Series 2004-19, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2004-19
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:3c98fee8-2558-4489-a61c-23fa53320971
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alan S. Blinder & Don H. Choi, 1990. "A Shred of Evidence on Theories of Wage Stickiness," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(4), pages 1003-1015.
    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:idq:ictduk:13551 is not listed on IDEAS
    2. Arcade NDORICIMPA, 2017. "Analysis of Asymmetries in the Tax-Spending Nexus in Burundi," Journal of Economics and Political Economy, KSP Journals, vol. 4(1), pages 53-70, March.
    3. Vanessa van den Boogaard & Wilson Prichard & Nikola Milicic & Matthew Benson, 2016. "Tax revenue mobilization in conflict-affected developing countries," WIDER Working Paper Series 155, World Institute for Development Economic Research (UNU-WIDER).
    4. Vanessa van den Boogaard & Wilson Prichard & Nikola Milicic & Matthew Benson, 2016. "Tax revenue mobilization in conflict-affected developing countries," WIDER Working Paper Series wp-2016-155, World Institute for Development Economic Research (UNU-WIDER).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. George Chouliarakis & Mónica Correa-López, 2009. "A Fair Wage Model of Unemployment with Inertia in Fairness Perceptions," Centre for Growth and Business Cycle Research Discussion Paper Series 130, Economics, The University of Manchester.
    2. Smith, Jennifer C., 2002. "Pay Cuts And Morale : A Test Of Downward Nominal Rigidity," The Warwick Economics Research Paper Series (TWERPS) 649, University of Warwick, Department of Economics.
    3. Emmanuel Saez & Benjamin Schoefer & David Seim, 2019. "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden," American Economic Review, American Economic Association, vol. 109(5), pages 1717-1763, May.
    4. W. Bentley MacLeod, 2006. "Reputations, Relationships and the Enforcement of Incomplete Contracts," CESifo Working Paper Series 1730, CESifo.
    5. Antonio Cabrales, 2010. "The causes and economic consequences of envy," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(4), pages 371-386, September.
    6. Erlandsen, Solveig K. & Juelsrud, Ragnar Enger, 2023. "Downward nominal house price rigidity: Evidence from three centuries of data on housing transactions," Economics Letters, Elsevier, vol. 225(C).
    7. Bruce Fallick & Daniel Villar Vallenas & William L. Wascher, 2016. "Downward Nominal Wage Rigidity in the United States During and After the Great Recession," Finance and Economics Discussion Series 2016-001r1, Board of Governors of the Federal Reserve System (U.S.), revised 15 May 2020.
    8. Bénédicte Reynaud, 1993. "Les théories de l'équité, fondements d'une approche cognitive du salaire d'efficience," Revue Économique, Programme National Persée, vol. 44(1), pages 5-22.
    9. Jed Armstrong & Miles Parker, 2016. "How wages are set: evidence from a large survey of firms," Reserve Bank of New Zealand Discussion Paper Series DP2016/03, Reserve Bank of New Zealand.
    10. Bartling, Björn & von Siemens, Ferdinand A., 2010. "The intensity of incentives in firms and markets: Moral hazard with envious agents," Labour Economics, Elsevier, vol. 17(3), pages 598-607, June.
    11. Cabrales, Antonio & Miniaci, Raffaele & Piovesan, Marco & Ponti, Giovanni, 2007. "An experiment on markets and contracts : do social preferences determine corporate culture?," UC3M Working papers. Economics we072010, Universidad Carlos III de Madrid. Departamento de Economía.
    12. Immordino Giovanni, 2008. "Fairness, Consumer Consciousness and the Welfare of Less Developed Countries," Global Economy Journal, De Gruyter, vol. 8(1), pages 1-21, February.
    13. Eva Branten & Ana Lamo & Tairi Room, 2018. "Nominal wage rigidity in the EU countries before and after the Great Recession: evidence from the WDN surveys," Bank of Estonia Working Papers wp2018-03, Bank of Estonia, revised 15 Jun 2018.
    14. Reynaud Benedicte, 1991. "Règles d'équité dans la formation des salaires (les) : des études expérimentales aux formalisations économiques," CEPREMAP Working Papers (Couverture Orange) 9111, CEPREMAP.
    15. Jonas Agell & Per Lundborg, 2003. "Survey Evidence on Wage Rigidity and Unemployment: Sweden in the 1990s," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 15-30, March.
    16. Hatime Kamilcelebi, 2019. "Framing Effect and Decision-Making in the Market: A Research on Profit-Seeking and Religiousness in Turkey," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 9(7), pages 417-425, July.
    17. Erica L. Groshen & Mark E. Schweitzer, 1996. "Macro- and microeconomic consequences of wage rigidity," Working Papers (Old Series) 9607, Federal Reserve Bank of Cleveland.
    18. Dufwenberg, Martin & Kirchsteiger, Georg, 2000. "Reciprocity and wage undercutting," European Economic Review, Elsevier, vol. 44(4-6), pages 1069-1078, May.
    19. Kåre Johansen, "undated". "Nonlinear Wage Responses to Internal and External Factors," Working Paper Series 0902, Department of Economics, Norwegian University of Science and Technology, revised 25 Aug 2002.
    20. George Chouliarakis & Mónica Correa-López, 2014. "A fair wage model of unemployment with inertia in fairness perceptions," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 88-114, January.

    More about this item

    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:csa:wpaper:2004-19. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Julia Coffey (email available below). General contact details of provider: https://edirc.repec.org/data/csaoxuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.