Research Article
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Year 2018, Volume: 7 Issue: 1, 83 - 88, 30.03.2018

Godwin Aloyce Myovella Zakayo Samson Kisava

https://doi.org/10.17261/Pressacademia.2018.797

Abstract

References

  • Abizadeh, S. and Yousefi, M. (1986). Political Parties, Deficits, and The Rate of Inflation: A Comparative Study. Journal of Social, Political and Economic Studies, 11, 393-411
  • Abizadeh, S., and Yousefi, M. (1998). Deficits and inflation: an open economy model of the United States. Applied Economics, 30, 10,13071316.https://doi.org/10.1080/000368498324922
  • Agha, A. I., and Khan, M. S. (2006). An empirical analysis of fiscal imbalances and inflation in Pakistan. SBP research Bulletin, 2(2), 343-362.
  • Akaike, H. (1974). A new look at the statistical model identification. IEEE Transactions on Automatic Control. 19, 6, 716-723. https://doi.org/10.1109/TAC.1974.1100705
  • Akçay, O. C., Alper, C. E. and Özmucur S. (2001). Budget Deficit, Inflation and Debt Sustainability: Evidence from Turkey (1970-2000)”, Boğazici University Research Papers, SBE 01-12, 96-120.
  • Akcay, O.C., Alper, C. E., and S. Ozmucur. (1996). Budget deficit, money supply and inflation: evidence from low and high frequency data for Turkey”, Bogazici University, Department of Economics, December.
  • Bank of Tanzania 2017. Monthly Economic Review
  • Bank of Tanzania 2017. Economic Bulletin, for the Quarter Ending September VOL. XLIX NO. 3
  • Barnhart, W.S., and Darrat, F.A. (1988). Budget deficits, money growth and causality: Further OECD evidence. Journal of International Money and Finance, 7, 231-242 https://doi.org/10.1016/0261-5606(88)90018-6
  • Burdekin, C.K.R., and Wohar, E.M. (1990). Monetary institutions, budget deficits and in inflation: Empirical results for eight countries. European Journal of Political Economy, 6, 531-551.https://doi.org/10.1016/0176-2680(90)90006-5
  • Brown, R. L., Durbin, J. and Evans, J. M. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society. Series B (Methodological) pp. 149–192.
  • Duasa, J. (2007). Determinants of Malaysian Trade Balance: An ARDL Bound Testing Approach”. Global Economic Review, 36,1, 89-102. https://doi.org/10.1080/12265080701217405
  • Pesaran, M. H. and Shin, Y. (1998). An autoregressive distributed-lag modeling approach to cointegration analysis., Econometric Society Monographs 31, 371–413
  • Pesaran, M. H., Shin, Y., Smith, R. J., and University of Cambridge. (1999). Bounds testing approaches to the analysis of long-run relationships. Cambridge: University
  • Hamburger, M.J. and Zwick, B. (1981). Deficit, money and inflation. Journal of Monetary Economics, 7 https://doi.org/10.1016/03043932(81)90057-X
  • IMF (2017). Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI)”—Statistical Update Keynes, J. (1971). A tract on monetary reform, (original 1923 paper) in The Collected Writings of John Maynard Keynes., vol. 4, MacMillan.
  • Lin, H.Y., and Chu, H.P. (2013), Are fiscal deficits inflationary ? Journal of International Money and Finance, 32, 214-233.
  • Muhammad et al. (2016). The Nexuses between Budget Deficit and Price Inflation in Pakistan: An ARDL Bound Testing Approach.” Pakistan Journal of Commerce and Social Science
  • Rose, D. C., and Hakes, D. R. (1995). Deficits and Interest Rates as Evidence of Ricardian Equivalence”. Eastern Economic Journal, 21, 1, 57.
  • Schwarz, G. et al. (1978). Estimating the dimension of a model. The annals of statistics 6(2), 461-464 https://doi.org/10.1214/aos/1176344136
  • Serban, M. (2002). Budget Deficit and Inflation. Academy of Economic Studies, Doctoral School of Finance and Banking, Bucharest.
  • Snowdon, B., and Vane, H. R. (2005). Modern macroeconomics: Its origins, development and current state.. Cheltenham, UK: E. Elgar. Chicago (Author-Date, 15th ed.)
  • Vieira, C. (2000). Are fiscal deficits inflationary?: Evidence for the EU. Loughborough, Leics.

BUDGET DEFICIT AND INFLATION IN TANZANIA: ARDL BOUND TEST APPROACH

Year 2018, Volume: 7 Issue: 1, 83 - 88, 30.03.2018

Godwin Aloyce Myovella Zakayo Samson Kisava

https://doi.org/10.17261/Pressacademia.2018.797

Abstract

Purpose -  The study
aimed at analyzing the existence of the long run relationship between the
government budget deficits and inflation in Tanzania.



Methodology - We used annual time series data for the budget deficit
and inflation from 1970 to 2015 sourced from International Monetary Fund (IMF)
database.  Autoregressive Distributed Lag
(ARDL) bound test approach Pesaran and Shin (2001) was used.



Findings-  Our results
revealed the positive relationship and existence of the long-run relationship
between budget deficits and inflation. The coefficient of the speed of
adjustment is significant at 5 percent; the whole system can get back to the
equilibrium at the speed of adjustment of 72% towards a long run.

Conclusion- We suggest the government to adopt measures that would
reduce the large budget deficit that has been growing over time. This would be
one of the necessary conditions in reducing inflation over time and thereby the
high economic growth witnessed can be sustainable.

Keywords

ARDL model budget deficit Inflation long run Tanzania

References

  • Abizadeh, S. and Yousefi, M. (1986). Political Parties, Deficits, and The Rate of Inflation: A Comparative Study. Journal of Social, Political and Economic Studies, 11, 393-411
  • Abizadeh, S., and Yousefi, M. (1998). Deficits and inflation: an open economy model of the United States. Applied Economics, 30, 10,13071316.https://doi.org/10.1080/000368498324922
  • Agha, A. I., and Khan, M. S. (2006). An empirical analysis of fiscal imbalances and inflation in Pakistan. SBP research Bulletin, 2(2), 343-362.
  • Akaike, H. (1974). A new look at the statistical model identification. IEEE Transactions on Automatic Control. 19, 6, 716-723. https://doi.org/10.1109/TAC.1974.1100705
  • Akçay, O. C., Alper, C. E. and Özmucur S. (2001). Budget Deficit, Inflation and Debt Sustainability: Evidence from Turkey (1970-2000)”, Boğazici University Research Papers, SBE 01-12, 96-120.
  • Akcay, O.C., Alper, C. E., and S. Ozmucur. (1996). Budget deficit, money supply and inflation: evidence from low and high frequency data for Turkey”, Bogazici University, Department of Economics, December.
  • Bank of Tanzania 2017. Monthly Economic Review
  • Bank of Tanzania 2017. Economic Bulletin, for the Quarter Ending September VOL. XLIX NO. 3
  • Barnhart, W.S., and Darrat, F.A. (1988). Budget deficits, money growth and causality: Further OECD evidence. Journal of International Money and Finance, 7, 231-242 https://doi.org/10.1016/0261-5606(88)90018-6
  • Burdekin, C.K.R., and Wohar, E.M. (1990). Monetary institutions, budget deficits and in inflation: Empirical results for eight countries. European Journal of Political Economy, 6, 531-551.https://doi.org/10.1016/0176-2680(90)90006-5
  • Brown, R. L., Durbin, J. and Evans, J. M. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society. Series B (Methodological) pp. 149–192.
  • Duasa, J. (2007). Determinants of Malaysian Trade Balance: An ARDL Bound Testing Approach”. Global Economic Review, 36,1, 89-102. https://doi.org/10.1080/12265080701217405
  • Pesaran, M. H. and Shin, Y. (1998). An autoregressive distributed-lag modeling approach to cointegration analysis., Econometric Society Monographs 31, 371–413
  • Pesaran, M. H., Shin, Y., Smith, R. J., and University of Cambridge. (1999). Bounds testing approaches to the analysis of long-run relationships. Cambridge: University
  • Hamburger, M.J. and Zwick, B. (1981). Deficit, money and inflation. Journal of Monetary Economics, 7 https://doi.org/10.1016/03043932(81)90057-X
  • IMF (2017). Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI)”—Statistical Update Keynes, J. (1971). A tract on monetary reform, (original 1923 paper) in The Collected Writings of John Maynard Keynes., vol. 4, MacMillan.
  • Lin, H.Y., and Chu, H.P. (2013), Are fiscal deficits inflationary ? Journal of International Money and Finance, 32, 214-233.
  • Muhammad et al. (2016). The Nexuses between Budget Deficit and Price Inflation in Pakistan: An ARDL Bound Testing Approach.” Pakistan Journal of Commerce and Social Science
  • Rose, D. C., and Hakes, D. R. (1995). Deficits and Interest Rates as Evidence of Ricardian Equivalence”. Eastern Economic Journal, 21, 1, 57.
  • Schwarz, G. et al. (1978). Estimating the dimension of a model. The annals of statistics 6(2), 461-464 https://doi.org/10.1214/aos/1176344136
  • Serban, M. (2002). Budget Deficit and Inflation. Academy of Economic Studies, Doctoral School of Finance and Banking, Bucharest.
  • Snowdon, B., and Vane, H. R. (2005). Modern macroeconomics: Its origins, development and current state.. Cheltenham, UK: E. Elgar. Chicago (Author-Date, 15th ed.)
  • Vieira, C. (2000). Are fiscal deficits inflationary?: Evidence for the EU. Loughborough, Leics.
There are 23 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

Godwin Aloyce Myovella This is me 0000-0002-0999-3585

Zakayo Samson Kisava This is me 0000-0002-5355-9743

Publication Date March 30, 2018
Published in Issue Year 2018 Volume: 7 Issue: 1

Cite

APA Myovella, G. A., & Kisava, Z. S. (2018). BUDGET DEFICIT AND INFLATION IN TANZANIA: ARDL BOUND TEST APPROACH. Journal of Business Economics and Finance, 7(1), 83-88. https://doi.org/10.17261/Pressacademia.2018.797

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