Modelling the Relationship between Budget Deficits, Money Supply and Inflation in Fiji

Pacific Economic Bulletin Vol. 21, No 2, pp. 103-116, 2006

Posted: 16 Jun 2012

See all articles by Paresh Kumar Narayan

Paresh Kumar Narayan

Deakin University - School of Accounting, Economics and Finance

Seema Narayan

affiliation not provided to SSRN

Arti Prasad

affiliation not provided to SSRN

Date Written: 2006

Abstract

Modelling the relationship between budget deficits, money supply and inflation in Fiji For Fiji, which has been suffering persistent deficits since independence, determining the relationships between inflation, budget deficits, money supply, output, and import prices is essential. We find that inflation, deficits and money supply are cointegrated when inflation is the endogenous variable, and the long-run elasticities confirm that money supply and deficits induce inflation. While there is a short-run, unidirectional causality running from money supply to inflation and a bidirectional causality between money supply and budget deficits, in the long run both money supply and deficits ‘Granger-cause’ inflation.

Suggested Citation

Narayan, Paresh Kumar and Narayan, Seema and Prasad, Arti, Modelling the Relationship between Budget Deficits, Money Supply and Inflation in Fiji (2006). Pacific Economic Bulletin Vol. 21, No 2, pp. 103-116, 2006, Available at SSRN: https://ssrn.com/abstract=2084917

Paresh Kumar Narayan (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Seema Narayan

affiliation not provided to SSRN ( email )

Arti Prasad

affiliation not provided to SSRN ( email )

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