You are here

Home » Content

THE EFFECT OF NOMINAL GOVERNMENT DEFICITS ON ECONOMIC GROWTH

Journal Name:

  • Ege Akademik Bakış Dergisi

Publication Year:

  • 2003
Author NameUniversity of AuthorFaculty of Author
Abstract (2. Language): 
It is basically accepted by now that there is a positive relationship between the nominal government deficits and inflation. Government deficits may be financed by monetary growth due to several reasons but whatever the reason, the result is an increase in inflation. This in turn may affect the growth of real GNP negatively, due to its adverse effects on the allocation of resources, on the labor market and on the decisions of firms. This paper combines these two links, i.e. nominal government deficits and inflation, and inflation and real GNP growth. It further shows the effect of nominal government deficits on the economic growth for Turkey. Our results from cointegration and causality tests show that for Turkey for the period of 1950- 2001, nominal government deficits led to increases in the monetary base only in the short run, causing inflation both in the short and the long run. The effect of inflation on real GNP growth is weak and in the reverse direction.
Bookmark/Search this post with
Abstract (Original Language): 
Cari hükümet açıkları ve enflasyon arasında pozitif bir ilişkinin varlığı genellikle kabul edilmiş bir olgudur. Hükümet açıkları birçok sebepten dolayı parasal büyüme ile finanse edilebilir; ancak sebep ne olursa olsun sonuç enflasyonda bir artıştır. Bu da kaynak dağılımı, işgücü piyasası ve firma kararlarına ters etkileri nedeniyle reel GSMH’daki büyümeyi negatif olarak etkileyebilir. Bu çalışmanın amacı, cari hükümet açıkları ve enflasyon, enflasyon ve reel GSMH’daki büyüme arasındaki iki bağlantıyı birleştirmek ve Türkiye’de cari hükümet açıklarının ekonomik büyümeye etkisini göstermektir. Eşbütünleşme ve nedensellik testlerini sonuçları, Türkiye’de 1950-2001 yılları arasında cari hükümet açıklarının sadece kısa dönemde parasal tabanda artışlara yol açarak, hem kısa hem de uzun dönemde enflasyona neden olduğunu göstermektedir. Enflasyonun reel GSMH büyümesine etkisi ise zayıf ve ters yöndedir.
FULL TEXT (PDF): 
PDF icon arastirmax-effect-nominal-government-deficits-economic-growth.pdf
  • 1
47-57
  • Turkish

REFERENCES

References: 

AGHEVLI, B.B. and KHAN M.S. (1978):
“Government Deficit and the Inflationary Process in
Developing Countries”, IMF Staff Papers, 25, pp. 383-
416.
AHKING, F.W. and MILLER S.M. (1985): “The
Relationship Between Government Deficit, Money
Growth and Inflation”, Journal of Macroeconomics,
7(4), pp. 447-467.
ALLEN, S.D. and SMITH M.D. (1983): “Government
Borrowing and Monetary Accommodation”, Journal of
Monetary Economics, 12, pp. 605-616.
ATKINS, F. J. and COE P. J.,(2002): “ An ARDL
Bounds Test of the Long-Run Fisher Effect in the
United States And Canada”, Journal of
Macroeconomics, 24 (2), pp. 255-266.
BALL, L. and CECCHETTI S.G. (1990): “Inflation
and Uncertainty at Short and Long Horizons”,
Brookings Papers on Economic Activity, 1, pp. 215-
245.
______ (1992): “Why does High Inflation Raise
Inflation Uncertainty?”, Journal of Monetary
Economics, 29, pp. 371-388.
BARRO, R. (1996): “Inflation and Growth”, Federal
Reserve Bank of St. Louis Review, 78(3), pp. 153-169.
BRUNO, M. and EASTERLY W. (1996): “Inflation
and Growth: In Search of a Stable Relationship”,
Federal Reserve Bank of St. Louis Review, 78(3), pp.
139-146.
56
CANAVESE, A.J. and HEYMANN D. (1992):
“Fiscal Lags and the High Inflation Trap”,
Quarterly Review of Economics and Finance,
32(2), pp. 100-109.
CEBULA, R. J. (1995): “ The Impact of Federal
Government Budget Deficits on Economic
Growth in the United States: An Empirical
Investigation, 1955-1992”, International Review
of Economics and Finance, 4(3), pp. 245-252
CHAREMZA, W. W. DEADMAN and D. F.
(1992): New Directions in Econometric
Practice, Edward Elgar, England.
DARRAT, A. (1986): “Money, Inflation and
Causality in the North African Countries: an
Empirical Investigation”, Journal of
Macroeconomics, 8(1), pp. 87-103.
DICKEY, D. and FULLER W.A. (1979):
“Distribution of the Estimates for
Autoregressive Time Series with a Unit Root”,
Journal of American Statistical Association,
74(366), pp. 427-431.
________________________ (1981):
“Likelihood Ratio Statistics for Autoregressive
Time Series with a Unit Root”, Econometrica,
49 (4), pp. 1057-1072.
DORNBUSCH, R., FISCHER S. and STARTZ
R. (2001): Maroeconomics, McGraw Hill, Eight
Edition, International Edition.
ENGLE, R. F. and GRANGER C. W. J. (1987):
“Cointegration and error Correction:
Representation, Estimation, And Testing”,
Econometrica, 55, pp. 251-276.
ENDERS, W. (1995): Applied Econometric
Time Series, Wiley Series In Probability and
Mathematical Statistics, John Wiley & Sons,
Inc.
FAHMY, Y. S. A. and KANDIL M. (2002):
“The Fisher Effect: New Evidence and
Implications”, International Review of
Economics & Finance, In Press, Uncorrected
Proof (Available online 11 September 2002)
FELDSTEIN, M. (1982), “Inflation, Tax Rules
and Investment: Some Econometric Evidence”,
Econometrica, 50(4), pp. 825-862.
FISHER, I. (1930): The Theory of Interest,
Macmillan, New York.
FISCHER, S. (1991): “Growth, Macroeconomics and
Development”, NBER Macroeconomics Annual, 6, pp.
329-364.
_________ (1993): “The Role of Macroeconomic
Factors in Growth”, Journal of Monetary Economics,
32, pp. 485-512.
_________ and MODIGLIANI F. (1978): “Towards
an Understanding of the Real Effects and Costs of
Inflation” , Weltwirtschaftlishes Archiv, 114(4), pp.
810-832.
FRANKEL, J.A. and LOWN C. S. (1994): “An
Indicator of Future Inflation Extracted From The
Steepness of The Interest Rate Yield Curve Along Its
Entire Length”, Quarterly Journal of Economics, 109,
pp. 517–530.
FRATIANNI, M. and SPINELLI F. (2001): “Fiscal
Dominance and Money Growth in Italy: The Long
Record”, Explorations in Economic History, 38, pp.
252-272.
GOVERNMENT PLANNING ORGANIZATION,
Turkey, www.dpt.gov.tr
GYLFASON, T. (1998): “Output Gains From
Economic Stabilization”, Journal of Development
Economics, 56, pp. 81-96.
GYLFASON, T. and HERBERTSSON T. T. (2001):
“Does Inflation Matter for Growth”, Japan and the
World Economy, 13, pp. 405-428.
HAMBURGER, M.J. and ZWICK B. (1981):
“Deficits, Money and Inflation”, Journal of Monetary
Economics, 7, pp. 141-150.
HOFFMAN, D.L., LOW S.A. and REINEBERG H.H.
(1983): “Recent Evidence On the Relationship
Between Money Growth and Budget Deficits”, Journal
of Macroeconomics, 5(2), pp. 223-231.
LOUNGANI P. and SHEETS N. (1997): “Central
Bank Independence, Inflation and Growth in Transition
Economies”, Journal of Money, Credit and Banking,
29(3), pp. 381-399.
LUCAS, R.E. (1973): “Some International Evidence on
Output-inflation Tradeoffs”, American Economic
Review, 63, pp. 326-335.
LUDVIGSON, S. (1996): “The Macroeconomic
Effects of Government Debt in a Stochastic Growth
Model”, Journal of Monetary Economics, 38, pp. 25-
45.
57
MISHKIN, F.S. (1990): “What Does The Term
Structure Tell Us About Future Inflation?”,
Journal of Monetary Economics, 25, pp. 77–95.
_______________ (1990): “The Information In
The Longer-Maturity Term Structure About
Future Inflation”, Quarterly Journal of
Economics, 105, pp. 815–828.
_______________ (1991): “A Multi-Country
Study Of The Information In The Shorter
Maturity Term Structure About Future
Inflation”, Journal of International Money and
Finance, 10, pp. 2–22.
NISKAKEN, W. A. (1978): “Deficits,
Government Spending, and Inflation, what is
the evidence?”, Journal of Monetary
Economics, 4, pp. 591-602.
ÖZATAY, F. (1997): “Sustainability of Fiscal
Deficits, Monetary Policy and Inflation
Stabilization: The Case of Turkey”, Journal of
Policy Modeling, 19(6), pp. 661-681.
PAKKO, M. R. (1998): “Shoe-Leather Costs of
Inflation and Policy Credibility”, Federal
Reserve Bank of St. Louis Review, 80(6), pp.
37-48.
PINDYCK, R.S. and SOLIMANO A. (1993):
“Economic Instability and Aggregate
Investment” NBER Working Paper, No. 4380.
SÖNMEZ, S. (1994): “Bütçe Açığının
Finansmanı ve Enflasyon”, METU Studies in
Development, 21(4), pp. 579-603.
ULENGIN, B. (1995): “Bütce Açığı, Parasal
Büyüme, Enflasyon, Döviz Kuru ve Üretim
Arasındakı Nedensellik İliskileri: Türkiye
Üzerine Bir Uygulama”, METU Studies in
Development, 22(1), pp. 101-116.

Thank you for copying data from http://www.arastirmax.com