Explaining Fiscal Policies and Inflation in Developing Countries / Sebastian Edwards, Guido Tabellini.

Format:

Book

Author/Creator:

Edwards, Sebastian.

Contributor:

National Bureau of Economic Research.

Tabellini, Guido.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3493.

NBER working paper series no. w3493

Language:

English

Subjects (All):

Fiscal policy.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1990.

Cambridge, Mass. : National Bureau of Economic Research, 1990.

Summary:

In this paper we investigate erririca1ly the determinants of inflation, seigniorage an fiscal deficits in developing countries. We first test the optimal taxation theory of inflation for a grip of 21 LDCs. We find that the implications of this theory is rejected for all the countries. We then proceed to implement a number of tests based on the new political economy approach to macroeconomic policies: we deal with some of the implications of a credibility and reputation model, and of a strategic government behavior model. We find that the data supports the most important predictions of the political economy view of fiscal policy. Our measures of political instability and political polarization play an important role in explaining cross country differences in seigniorage, inflation, government borrowing and fiscal deficits. We end by discussing directions for future research.

Notes:

Print version record

October 1990.

Includes bibliographical references.