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Fiscal Dominance and Inflation in the Democratic Republic of the Congo

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  • Jean-Claude Nachega

Abstract

This paper examines the fiscal dominance hypothesis in the Democratic Republic of the Congo (DRC) during 1981-2003, using multivariate cointegration analysis and vector errorcorrection modeling. Empirical results point to strong and statistically significant long-run relationships between budget deficits and seigniorage, and between money creation and inflation. The long-run inflationary impact of budget deficits is robust to the inclusion of output growth or velocity in the inflation and monetary growth equations. The paper offers some policy recommendations for long-term price stability in the DRC.

Suggested Citation

  • Jean-Claude Nachega, 2005. "Fiscal Dominance and Inflation in the Democratic Republic of the Congo," IMF Working Papers 05/221, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:05/221
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. LONZO LUBU, Gastonfils & AVOM, Desiré, 2014. "Les Effets Non Lineaires Des Dépenses Publiques Sur La Croissance Économique En Rd Congo
      [Nonlinear Effects Of Spending On Economic Growth In Dr Congo]
      ," MPRA Paper 60716, University Library of Munich, Germany.
    2. Afolabi, Joseph Olarewaju & Atolagbe, Oluwafemi, 2018. "Empirical analysis of fiscal dominance and the conduct of monetary policy in Nigeria," MPRA Paper 88786, University Library of Munich, Germany.

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