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Monetary and Fiscal Policies in Bulgaria: Lessons from the Historical Record

  • Kalina Dimitrova

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    There are two aspects through which an economic policy can influence the economic situation – monetary and fiscal. Monetary and fiscal policies have different and sometimes controversial goals to achieve by means of specific instruments. While the mission of central banks is generally price stability, governments usually set their goals in the realm of economic growth and employment. Fiscal institutions , however, often use inflation in order to derive revenues (seigniorage) and finance budget deficits. Hence, inflation is viewed as a public finance phenomenon (Barro, 1979; Mankiw, 1987; Grilli, 1989). The purpose of this paper is to present a historical perspective on the behaviour of the monetary and fiscal policies pursued in Bulgaria from 1879, when the Bulgarian National Bank was established (soon after the liberation from the Ottoman Empire). Furthermore, historical time series of monetary and fiscal indicators give us the chance to study the link between government budget problems, fluctuations of monetary variables and inflation dynamics in different monetary episodes.

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    File URL: http://servizi.sme.unito.it/icer_repec/RePEc/icr/wp2010/ICERwp13-10.pdf
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    Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 13-2010.

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    Length: 21 pages
    Date of creation: Sep 2010
    Date of revision:
    Handle: RePEc:icr:wpicer:13-2010
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    1. Jean-Baptiste Desquilbet & Nikolay Nenovsky, 2004. "Credibility and Adjustment : Gold Standards versus Currency Boards," CAE Working Papers 11, Aix-Marseille Université, CERGAM.
    2. Michael Woodford, 2001. "Fiscal Requirements for Price Stability," NBER Working Papers 8072, National Bureau of Economic Research, Inc.
    3. Michael Woodford, 1995. "Price Level Determinacy Without Control of a Monetary Aggregate," NBER Working Papers 5204, National Bureau of Economic Research, Inc.
    4. Fratianni, Michele & Spinelli, Franco, 2001. "Fiscal Dominance and Money Growth in Italy: The Long Record," Explorations in Economic History, Elsevier, vol. 38(2), pages 252-272, April.
    5. King, Robert G. & Plosser, Charles I., 1985. "Money, deficits, and inflation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 22(1), pages 147-195, January.
    6. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
    7. Sabate, Marcela & Gadea, Maria Dolores & Escario, Regina, 2006. "Does fiscal policy influence monetary policy? The case of Spain, 1874-1935," Explorations in Economic History, Elsevier, vol. 43(2), pages 309-331, April.
    8. Kalina Dimitrova & Luca Fantacci, 2010. "Financial stability, monetary autonomy and fiscal interference: Bulgaria in search of its way, 1879-1913," William Davidson Institute Working Papers Series wp979, William Davidson Institute at the University of Michigan.
    9. N. Gregory Mankiw, 1987. "The Optimal Collection of Seigniorage: Theory and Evidence," NBER Working Papers 2270, National Bureau of Economic Research, Inc.
    10. Grilli, Vittorio, 1989. "Exchange rates and seigniorage," European Economic Review, Elsevier, vol. 33(2-3), pages 580-587, March.
    11. Olivier Blanchard, 2004. "Fiscal Dominance and Inflation Targeting: Lessons from Brazil," NBER Working Papers 10389, National Bureau of Economic Research, Inc.
    12. Barro, Robert J., 1987. "Government spending, interest rates, prices, and budget deficits in the United Kingdom, 1701-1918," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 221-247, September.
    13. Kalina Dimitrova & Nikolay Nenovsky, 2006. "Exchange Rate and Inflation: France and Bulgaria in the Interwar Period," ICER Working Papers 34-2006, ICER - International Centre for Economic Research.
    14. Joines, Douglas H., 1985. "Deficits and money growth in the United States 1872-1983," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 329-351, November.
    15. Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer, vol. 4(3), pages 381-99.
    16. Willem H. Buiter, 2002. "The Fiscal Theory Of The Price Level: A Critique," Economic Journal, Royal Economic Society, vol. 112(481), pages 459-480, July.
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