Fiscal Deficits, Monetary Reform and Inflation: The Case of Romania

Nina Budina and Sweder van Wijnbergen

No 37, East European Series from Institute for Advanced Studies

Abstract: The main objective of this paper is to explain the phenomena of persistent inflation in Romania through the use of a simple empirical model which highlights the links between inflation and the government budget deficit. We discuss the importance of using a proper definition of the public sector when calculating the public sector deficit and illustrate the impact of using different measures of public sector deficits on the assessment of consistency between monetary and fiscal policy. We then discuss the effect of switching to market interest rates on domestic debt as well as the impact of real exchange rate depreciation and financial sector reform on the financeable deficit and the required deficit reduction for given inflation targets.

Keywords: Monetary and Fiscal Policy; Inflation; Romania; Real Exchange Rate Dynamics (search for similar items in EconPapers)
JEL-codes: E31 E63 (search for similar items in EconPapers)
Pages: 36 pages
Date: 1996-09
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Citations: View citations in EconPapers (1)

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