Explaining Fiscal Policies and Inflation in Developing Countries

Sebastian Edwards and Guido Tabellini

No 3493, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we investigate erririca1ly the determinants of inflation, seigniorage an fiscal deficits in developing countries. We first test the optimal taxation theory of inflation for a grip of 21 LDCs. We find that the implications of this theory is rejected for all the countries. We then proceed to implement a number of tests based on the new political economy approach to macroeconomic policies: we deal with some of the implications of a credibility and reputation model, and of a strategic government behavior model. We find that the data supports the most important predictions of the political economy view of fiscal policy. Our measures of political instability and political polarization play an important role in explaining cross country differences in seigniorage, inflation, government borrowing and fiscal deficits. We end by discussing directions for future research.

Date: 1990-10
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Journal of International Money and Finance, Vol. 10, pp. S16-S48, (1991).

Downloads: (external link)
http://www.nber.org/papers/w3493.pdf (application/pdf)

Related works:
Journal Article: Explaining fiscal policies and inflation in developing countries (1991)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3493

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3493

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().