Economics at your fingertips  

Inflation and the Impact of Budgets

Robert Ackland

Australian Economic Review, 1991, vol. 24, issue 3, 28-37

Abstract: This article focuses on the adjustment of budget figures for the effect of inflation on the value of government debt. It asks whether such adjustment improves their performance as a measure of ‘fiscal impact’. If inflation significantly influences the impact of budgets on the real economy, policy‐makers may make inappropriate fiscal policy decisions if they are guided by unadjusted budget figures. The article argues that if agents perceive holdings of government debt as part of their wealth, changes in the real value of debt will have an effect on consumption behaviour. Therefore to assess the impact of fiscal policy on consumption it may be necessary to adjust budget figures so that they accurately indicate changes in the real value of debt held by the private sector. This article adjusts a series of structural public sector borrowing requirements (PSBR) for the effect of inflation on the real value of government debt held by the private sector. An empirical analysis concludes that the inflation‐adjusted budget series provides a superior measure of fiscal impact on consumption, and hence the real economy.

Date: 1991
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)

Related works:
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:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0004-9018

Access Statistics for this article

Australian Economic Review is currently edited by Ross Williams, Ian McDonald and Mark Wooden

More articles in Australian Economic Review from The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2023-09-11
Handle: RePEc:bla:ausecr:v:24:y:1991:i:3:p:28-37