Author:
Burdekin Richard C.K.,Wohar Mark E.
Abstract
The relative impacts of the monetised and non‐monetised deficit on
output and inflation in the United States are assessed using annual data
for the 1923‐1982 period. With Federal Reserve purchases of government
debt serving as a measure of monetisation, the results of Granger
causality tests suggest that for the period 1923‐1960 neither deficit
growth nor monetisation affected real GNP growth, nominal GNP growth or
inflation. For the period 1961‐1982, monetisation is found to have
fuelled inflation with no effect on real GNP. Non‐monetised deficits
provided a negative short‐run impact on the rate of inflation over this
latter period.
Subject
General Economics, Econometrics and Finance