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On the impact of fiscal policy on inflation: The case of fiscal rules

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  • Jocelyne Zoumenou

Abstract

This paper examines the impact of fiscal rules on inflation across 79 countries from 1985 to 2021, employing entropy balancing as the methodology. By adopting this approach, the study addresses potential endogeneity concerns and takes into account variations among different country groups, including advanced economies, emerging markets, developing economies, and low-income countries. The primary outcome derived from the analysis indicates a negative relationship between fiscal rules and inflation in emerging and low-income countries. Moreover, this effect is observed for moderate and high inflation rates. These results are robust to different specifications.

Suggested Citation

  • Jocelyne Zoumenou, 2023. "On the impact of fiscal policy on inflation: The case of fiscal rules," EconomiX Working Papers 2023-21, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2023-21
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    More about this item

    Keywords

    Fiscal policy ; Inflation ; Propensity score methodology;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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