Inflation and Public Debt

Jose Pablo Barquero-Romero () and Kerry Loaiza-Marín ()
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Jose Pablo Barquero-Romero: Department of Economic Research, Central Bank of Costa Rica
Kerry Loaiza-Marín: Department of Economic Research, Central Bank of Costa Rica

No 1701, Documentos de Trabajo from Banco Central de Costa Rica

Abstract: This paper aims to determine if a deterioration in public finances, understood as an increase in public debt, tends to increase inflation. We study the relationship between public debt, economic growth, money supply growth and inflation. To do this we follow the methodology proposed by Kwon, McFarlane and Robinson (2009), who perform a panel data estimation using a sample of net debtor´s countries. We find that for countries who already have a high level of public debt, further increases in public debt are inflationary. ***Resumen: Esta investigación busca determinar si un deterioro de las finanzas públicas, en la forma de un mayor crecimiento de la deuda pública, tiende a incrementar la inflación. Se estudian los efectos de cambios e interrelaciones entre la deuda pública, el crecimiento del dinero, el crecimiento económico y la inflación, siguiendo la metodología utilizada por Kwon, McFarlane y Robinson (2009), mediante un conjunto de datos de panel para una muestra de países considerados deudores netos. Se encuentra que para países que poseen un alto nivel de deuda pública sus incrementos son inflacionarios.

Keywords: Fiscal policy; Monetary policy, Política Fiscal, Política monetaria (search for similar items in EconPapers)
JEL-codes: E60 E63 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2019-07
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Persistent link: https://EconPapers.repec.org/RePEc:apk:doctra:1701

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