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Analysis of Equilibrium Relationship among Government Budget Deficit, Money Supply and Inflation in Ethiopia: Co-integrated VAR Analysis Approach

Abstract: 

This study attempted to provide empirical evidences for causal long‐term relationship between budget deficit, broad money supply and inflation in Ethiopia. For this purpose, the study employed co-integrated VAR or vector error correction (VEC) model approach by using annual time series data over 1975-2012. The study also investigated direction of causality by using Granger causality test. Parameters of the system were estimated by using Johansen estimation approach. The results show that positive causal relationship between money supply and inflation both in the short and long run. It also shows that budget deficit affects both money supply and inflation in the long run. However, this is not conclusive by taking into account granger causality test. But both money supply and inflation do not Granger cause government budget deficit

Corporate Author: 
Ethiopian Economics Association
Publisher: 
Ethiopian Economic Association
ISBN/ISSN: 
1993-3681
Primary Descriptors: 

Budget Deficit

Secondary Descriptor: 

Money Supply

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
08/08/2016
Broad Subject heading: 
Inflation
Call Number: 
330.5 ETH JOU 2015
Serial Key Title: 
Ethiopian Journal Of Economics
Publication catagory: 
Content type: 
Volume: 
XXIII
Year: 
October 2014
Publication date: 
2015-12-01 00:00:00
Number: 
2
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Semiannual