Inflation and the Size of Government

Han, Song; Mulligan, Casey B.

doi:10.2139/ssrn.298353

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Inflation and the Size of Government

44 Pages Posted: 30 Jan 2002

See all articles by Song Han

Song Han

Board of Governors of the Federal Reserve System

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

Date Written: November 2001

Abstract

It is commonly supposed in public and academic discourse that inflation and big government are related. We show that economic theory delivers such a prediction only in special cases. As an empirical matter, inflation is significantly positively related to the size of government mainly when periods of war and peace are compared. We find a weak positive peacetime time series correlation between inflation and the size of government and a negative cross-country correlation of inflation with non-defense spending.

Keywords: Inflation, government size, central bank independence

JEL Classification: E5, H0, H6

Suggested Citation: Suggested Citation

Han, Song and Mulligan, Casey B., Inflation and the Size of Government (November 2001). Available at SSRN: https://ssrn.com/abstract=298353 or http://dx.doi.org/10.2139/ssrn.298353