Government Deficits and Money Growth

Stuart Landon () and Bradford G Reid

The Review of Economics and Statistics, 1990, vol. 72, issue 3, 382-89

Abstract: Additional empirical evidence is provided concerning the impact of government financing decisions on monetary expansion in the United States for the post-World War II period. The budget position of the fiscal authority and the rate of money growth set by the Fed are specified as endogenous variables within a system of equations. The empirical analysis generates evidence of a policy shift in the 1980s, with budget deficits exerting no independent influence on high-powered money growth prior to 1981 while, after 1981, such a linkage is found to exist. Copyright 1990 by MIT Press.

Date: 1990
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