Farewell Non-Ricardian Regime & Cracked cyclical Inflation
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| Title | Farewell Non-Ricardian Regime & Cracked cyclical Inflation
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| Author | Cui Huimin, Li Wenqing and Cui Yong |
| Organization | Anhui University of Finance and Economic; National Development and Reform Commission; People's Bank of China |
| Email | cuihuimin@ruc.edu.cn；liwq@ruc.edu.cn;choi_younger@yahoo.com.cn |
| Key Words | Budget Deficit; Inflation; Seigniorage; Monetary Policy |
| Abstract | In the past 30 years, China’s budget expenditures have been exceeded revenues almost through the period. Theoretically speaking, if long-term budget deficit can not be offset by government taxes, then it would be offset by seigniorage, then inevitably lead to high inflation. Moreover, if the fiscal authority dominated the monetary authority, the price level would be determined by fiscal authority itself. If the government’s barrowing capacities have no restriction, the high inflation maybe occur. Thus, we establish a theoretical model & analysis framework from the government budget constrain function & make the corresponding econometric test & empirical analysis. The main conclusions are as follows: At the present government financing system, the inflation in China is a fiscal phenomenon in a large degree. In order to control the periodic inflation, we should not only adjust the fiscal policy, but also reform the fiscal system & the monetary system to perfect the government financing system. |
| Serial Number | WP655 |
| Time | 2014-08-15 |
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