n South African Journal of Economic and Management Sciences - The effect of a budget deficit on inflation : the case of Tanzania
|Article Title||The effect of a budget deficit on inflation : the case of Tanzania|
|© Publisher:||University of Pretoria|
|Journal||South African Journal of Economic and Management Sciences|
|Author||M. Solomon and W.A. De Wet|
|Publication Date||Mar 2004|
|Pages||100 - 116|
|Keyword(s)||E62 and H62|
ISI Social Science
The Tanzanian economy has remained one of the limited numbers of countries that has experienced a relatively high inflation rate, accompanied by high fiscal deficits for a prolonged period in the absence of any hyperinflation. This paper examines the deficit-inflation relationship in the Tanzanian economy and establishes the causal link that runs from the budget deficit to the inflation rate using cointegration analysis over the period 1967-2001. Some dynamic simulations are done to gauge the effect of a change in the budget deficit and gross domestic product on inflation over time. Due to monetisation of the budget deficit, significant inflationary effects are found for increases in the budget deficit.
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