01826cas a2200253 a 4500 AALejournalIMF002316 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451848700 1018-5941 BD-DhAAL BD-DhAAL Catao, Luis. Fiscal Deficits and Inflation / Luis Catao, Marco Terrones. Washington, D.C. : International Monetary Fund, 2003. 1 online resource (33 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Macroeconomic theory postulates that fiscal deficits cause inflation. Yet empirical research has had limited success in uncovering this relationship. This paper reexamines the issue in light of broader data and a new modeling approach that incorporates two key features of the theory. Unlike previous studies, we model inflation as nonlinearly related to fiscal deficits through the inflation tax base and estimate this relationship as intrinsically dynamic, using panel techniques that explicitly distinguish between short- and long-run effects of fiscal deficits. Results spanning 107 countries over 1960-2001 show a strong positive association between deficits and inflation among high-inflation and developing country groups, but not among low-inflation advanced economies. Mode of access: Internet Terrones, Marco. IMF Working Papers; Working Paper ; No. 2003/065 Full text available on IMF http://elibrary.imf.org/view/journals/001/2003/065/001.2003.issue-065-en.xml IMF e-Library