Are budget deficits inflationary? A cointegration approach

Abstract

This paper investigates the direct and indirect effects of budget deficit on inflation in Greece for the period 1957–93. The empirical analysis employs tests of cointegration, as suggested by Johansen and Juselius, as pretests for Granger tests of causality. The empirical evidence suggests that the indirect effects of budget deficits on inflation exist while the direct effects are not present.

¹ The views expressed in this paper are those of the authors.

¹ The views expressed in this paper are those of the authors.

Notes

¹ The views expressed in this paper are those of the authors.