Regime Specific Fiscal Effects and the Conditional Role of Institutions: The Case of Mexico

Yıl 2025, Cilt: 18 Sayı: 3, 669 - 682

Seher Gökpınar , Taha Bahadır Saraç

https://doi.org/10.17218/hititsbd.1755542

Öz

Institutional quality is a critical element in explaining the inflationary effects of fiscal deficits. Countries with strong institutions can limit the inflationary effects of fiscal deficits by implementing fiscal discipline more effectively. In contrast, in countries with weak institutional structures, deficiencies in transparency, accountability, government effectiveness, and policy consistency increase the inflationary pressures arising from fiscal imbalances. This study examines the impact of fiscal deficits on inflation in Mexico and the regime-dependent moderating role of institutional quality. To analyze the relationship dynamics that vary according to inflation regimes, a Markov Regime-Switching model was estimated using annual data for the period 2002–2022. The findings show that fiscal deficits are not directly effective on inflation under either regime. However, in the high-inflation regime, government effectiveness is statistically significant and creates a disinflationary effect. This result reveals that strong institutional structures play a critical role in reducing the inflationary effects of fiscal pressures under high-inflation conditions. In the low-inflation regime, the interaction term between fiscal deficits and government effectiveness is negative and significant. This indicates that institutional quality increases the effectiveness of fiscal discipline during periods when price pressures are limited. The findings reveal that institutional quality and regime type are critical factors in determining the inflationary effects of fiscal deficits. They also emphasize the importance of sustaining institutional reforms in countries aiming at price stability. In this context, the case of Mexico has shown that inflation regimes and institutional factors cannot be overlooked in evaluating the inflationary effects of fiscal deficits.

Anahtar Kelimeler

Inflation , Fiscal deficit , Institutional Quality , Markov Regime-Switching Model , Mexico

Rejime Özgü Mali Etkiler ve Kurumların Koşula Bağlı Rolü: Meksika Örneği

Öz

Kurumsal kalite, mali açıkların enflasyonist etkilerini açıklamada kritik bir unsurdur. Güçlü kurumlara sahip ülkeler, mali disiplini daha etkin bir şekilde uygulayarak mali açıkların enflasyonist etkilerini sınırlayabilmektedir. Buna karşılık, zayıf kurumsal yapılara sahip ülkelerde şeffaflık, hesap verebilirlik, hükümet etkinliği ve politika tutarlılığı alanlarındaki eksiklikler, mali dengesizliklerden kaynaklanan enflasyonist baskıları artırmaktadır. Bu çalışma, Meksika’da mali açıkların enflasyon üzerindeki etkisini ve kurumsal kalitenin rejime bağlı düzenleyici rolünü incelemektedir. Enflasyon rejimlerine göre değişen ilişki dinamiklerini analiz etmek için 2002–2022 dönemine ait yıllık veriler kullanılarak Markov Rejim-Değiştirme modeli tahmin edilmiştir. Bulgular, mali açıkların her iki rejimde de enflasyon üzerinde doğrudan etkili olmadığını göstermektedir. Ancak, yüksek enflasyon rejiminde hükümet etkinliği istatistiksel olarak anlamlıdır ve dezenflasyonist bir etki yaratmaktadır. Bu sonuç, güçlü kurumsal yapıların yüksek enflasyon koşullarında mali baskıların enflasyonist etkilerini azaltmada kritik bir rol oynadığını ortaya koymaktadır. Düşük enflasyon rejiminde ise mali açık ile hükümet etkinliği arasındaki etkileşim terimi negatif ve anlamlıdır. Bu durum, fiyat baskılarının sınırlı olduğu dönemlerde kurumsal kalitenin mali disiplinin etkinliğini artırdığını göstermektedir. Elde edilen bulgular, kurumsal kalite ve rejim türünün, mali açıkların enflasyonist etkilerinin belirlenmesinde kritik unsurlar olduğunu ortaya koymaktadır. Ayrıca fiyat istikrarını hedefleyen ülkelerde kurumsal reformları sürdürmenin önemini vurgulamaktadır. Bu çerçevede, Meksika örneği mali açıkların enflasyonist etkilerinin değerlendirilmesinde enflasyon rejimi ve kurumsal faktörlerin göz ardı edilemeyeceğini göstermektedir.

Anahtar Kelimeler

Enflasyon , Mali açık , Kurumsal Kalite , Markov Rejim Değiştirme Modeli , Meksika

Kaynakça

• Agoba, A. M. (2019). Minimising the inflationary impact of fiscal deficits in Africa: The role of monetary, financial and political institutions. Int J Fin Econ 26(1), 724–740. https://doi.org/10.1002/ijfe.1813
• Agnello, L., & Sousa, R. M. (2009). The determinants of public deficit volatility. ECB Working Paper Series No. 1042. Retrieved from: https://ssrn.com/abstract=1367529
• Alesina A., Hausmann, R., Hommes R., & Stein, E. (1999). Budget institutions and fiscal performance in Latin America. J Dev Econ 59(2), 253–273. https://doi.org/10.1016/S0304-3878(99)00012-7
• Arık, E., Özbey, F., & Kandır, S. Y. (2023). Borsa İstanbul’da işlem gören yenilebilir enerji şirketlerinin pay fiyat etkinliğinin Fourier birim kök testleri ile sınanması. İşletme ve İktisat Çalışmaları Dergisi, 11(2), 114-126. Retrieved from: https://dergipark.org.tr/tr/pub/iicder/issue/80364/1366285
• Avcı, M. A., Altay, O., & Sulak, H. (2016). Finansal krizlerin öngörüsünde Markov rejim değişim analiz modeli: Gelişmekte olan ülkelere yönelik bir analiz. Süleyman Demirel Üniversitesi İİBF Dergisi, 21(2), 463-475. Retrieved from: https://dergipark.org.tr/tr/pub/sduiibfd/issue/20860/223825
• Banerjee, R., Boctor, V., Mehrotra, A. N., & Zampolli, F. (2023). Fiscal deficits and inflation risks: the role of fiscal and monetary regimes. Bank for International Settlements, Monetary and Economic Department. Retrieved from: https://www.bis.org/publ/work1028.htm
• Becker, R., Enders W., & Lee, J. (2006). A stationarity test in the presence of an unknown number of smooth breaks. J Time Ser Anal 27(3), 381–409. https://doi.org/10.1111/j.1467-9892.2006.00478.x
• Bleaney, M., Morozumi, A., & Mumuni, Z. (2016). Fiscal deficits and inflation: institutions matter. University of Nottingham, UK. Retrieved from: https://share.google/fuj8sJ5FpfEHtuNYD
• Bodea, C., & Hicks, R. (2015). Price stability and central bank independence: Discipline, credibility, and democratic institutions. International Organization 69(1), 35–61. https://doi.org/10.1017/S0020818314000277
• Catão, L., & Terrones, M. E. (2001). Fiscal deficits and inflation: a new look at the emerging market evidence. IMF Work Pap WP/01/74. Retrieved from: https://www.imf.org/en/Publications/WP/Issues/2016/12/30/Fiscal-Deficits-and-Inflation-A-New-Look-at-the-Emerging-Market-Evidence-15188
• Catão, L. A., & Terrones, M. E. (2005). Fiscal deficits and inflation. J Monet Econ 52(3), 529–554. https://doi.org/10.1016/j.jmoneco.2004.06.003
• Cukierman, A., Edwards, S., & Tabellini, G. (1992). Seignioriage and political instability. American Economic Review, v82(3), 537-555. https://doi.org/10.3386/w3199
• Cosslett, S. R., & Lee, L. F. (1985). Serial correlation in latent discrete variable models. J Econom 27(1), 79–97. https://doi.org/10.1016/0304-4076(85)90045-4
• Dabla-Norris, E., Allen, R., Zanna, L.F., Prakash, T., Kvintradze, E., Lledo, V… Gollwitzer, S. (2010). Budget institutions and fiscal performance in low-income countries. IMF Work Pap 10/80:1–56. Retrieved from: https://www.bookstore.imf.org/books/budget-institutions-and-fiscal-performance-in-low-income-countries
• De Haan, J., & Zelhorst, D. (1990). The impact of government deficits on money growth in developing countries. J Int Money Financ 9(4), 455–469. https://doi.org/10.1016/0261-5606(90)90022-R
• Enders, W., & Lee, J. (2012a). A unit root test using a Fourier series to approximate smooth breaks. Oxf Bull Econ Stat 74(4), 574–599. https://doi.org/10.1111/j.1468-0084.2011.00662.x
• Enders, W., & Lee, J. (2012b). The flexible Fourier form and Dickey–Fuller type unit root tests. Econ Lett 117(1),196–199. https://doi.org/10.1016/j.econlet.2012.04.081
• Fischer, S., Sahay, R., & Végh, C. A. (2002). Modern hyper- and high inflations. J Econ Lit 40(3), 837–880.
• Goldfeld, S. M., & Quandt, R. E. (1973). A Markov switching regression. J Econom 1(1), 3–15. https://doi.org/10.1016/0304-4076(73)90002-X
• Hamilton, J. D. (1989). A new approach to economic analysis of nonstationary time series and the business cycle. Econometrica 57(2):357–384. https://doi.org/10.2307/1912559
• Harberger, A. C. (1996). Fiscal Deficits and the inflation process. In Manuel Guitian and Rober Mundell (Eds.), Inflation and Growth in China. Proceedings of a conference held in Beijing China, May 10-12, 1995. Washington DC: International Monetary Fund. Retrieved from: https://www.elibrary.imf.org/display/book/9781557755421/ch005.xml
• Helmy, H. E. (2022). The external debt-inflation nexus in Egypt. Journal of Public Affairs, 22(Suppl. 1), e2802. https://doi.org/10.1002/pa.2802
• Ho, T. T, Nguyen, V. B., & Nguyen, T. B. N. (2023). The different role of governance in the fiscal deficit–inflation between developed and developing countries. Macroecon Financ Emerg Mark Econ 16(3), 377–388. https://doi.org/10.1080/17520843.2021.1973787
• Ishaq, T., & Mohsin, H. M. (2015). Deficits and inflation; are monetary and financial institutions worthy to consider or not? Borsa Istanb Rev 15(3), 180–191. https://doi.org/10.1016/j.bir.2015.03.002
• Karras, G. (1994). Macroeconomic effects of budget deficits: further international evidence. J Int Money Financ 13(2),190–210. https://doi.org/10.1016/0261-5606(94)90015-9
• Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The worldwide governance indicators: methodology and analytical issues. World Bank Policy Research Working Paper 5430. Retrieved from: https://documents.worldbank.org/en/publication/documentsreports/documentdetail/630421468336563314/the-worldwide-governance-indicators-methodology-and-analytical-issues
• King, R. G., & Plosser, C. I. (1985). Money, deficits, and inflation. Carnegie-Rochester Conf Ser Public Policy 22, 147–196. https://doi.org/10.1016/0167-2231(85)90031-4
• Koluri, B. R, & Giannaros, D. S. (1987). Deficit and external debt effects on money and inflation in Brazil and Mexico: Some evidence. East Econ J 13(3), 243–248. Retrieved from: https://www.jstor.org/stable/40325137
• Lin, H. Y., & Chu, H. P. (2013). Are fiscal deficits inflationary? J Int Money Financ 32, 214–233. https://doi.org/10.1016/j.jimonfin.2012.04.006
• Lopez-Martin, B., Ramírez de Aguilar, A., & Samano, D. (2018). Fiscal policy and inflation: Understanding the role of expectations in Mexico. IDB Working Papers 2018-18. Retrieved from: https://ideas.repec.org/p/idb/brikps/9025.html
• Loungani, P., & Swagel, P. L. (2001). Sources of inflation in developing countries. IMF Working Paper No. 01/198. https://doi.org/10.5089/9781451860061.001
• Manuel, R. F., Santiago, G. V., & Manuel, S. M. (2018). Inflation dynamics under fiscal deficit regime switching in Mexico, Working Papers, No. 2018-21, Banco de México, Ciudad de México. Retrieved from: https://ideas.repec.org/p/bdm/wpaper/2018-21.html
• Meza, F. (2018). Mexico from the 1960s to the 21st Century: from fiscal dominance to debt crisis to low inflation (SSRN Scholarly Paper No. 3182594). Available at SSRN: http://dx.doi.org/10.2139/ssrn.3182594
• Neyapti, B. (2003). Budget deficits and inflation: the roles of central bank independence and financial market development. Contemp Econ Policy 21(4), 458–475. https://doi.org/10.1093/cep/byg025
• Nguyen, T. T. A., Nguyen, T. V. A., & Tran, N. A. M. (2023). The relationship between budget revenue-expenditure and inflation in Vietnam: Viewed from the Results of Quantitative Analysis. International Journal Business Management. 06(10), 202-218. https://doi.org/10.5281/zenodo.10022848
• Piger, J. (2013). Econometrics: Models of Regime Changes. Encyclopedia of Complexity and Systems Science, 1–20. Retrieved from: https://link.springer.com/rwe/10.1007/978-0-387-30440-3_165
• Sargent, T., & Wallace, N. (1987). Inflation and the government budget constraint. In Razin A, Sadka E (Eds) Economic policy in theory and practice., (pp 170–207). London: Palgrave Macmillan. https://doi.org/10.1007/978-1-349-18584-9_5
• Sönmez, S. (1998). Türkiye’de Kamu (açığının) Finansmanı ve Enflasyon Vergisi. ODTÜ Gelişme Dergisi, 25(2), 361-377. Retrieved from: https://open.metu.edu.tr/handle/11511/108375
• Tong, H. (1983). Threshold models in nonlinear time series analysis. Lecture Notes in Statistics. Berlin: Springer Verlag. Retrieved from: https://link.springer.com/book/10.1007/978-1-4684-7888-4
• Woo, J. (2003). Economic, political, and institutional determinants of public deficits. J Public Econ 87(3–4), 387–426. https://doi.org/10.1016/S0047-2727(01)00143-8
• Von Hagen, J. (2012). Budgeting procedures and fiscal performance in the European community. EEC Economic Papers, 96. Retrieved from: https://api.semanticscholar.org/CorpusID:204859851