Hostname: page-component-848d4c4894-tn8tq Total loading time: 0 Render date: 2024-06-25T04:35:24.895Z Has data issue: false hasContentIssue false
  • English
  • Français

Budget Deficits, Inflation Accounting, and Macroeconomic Policy: A Skeptical Note

Published online by Cambridge University Press:  28 November 2008

Thanos Catsambas
Thanos Catsambas
Affiliation:
Economist, International Monetary Fund*
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper challenges the mechanical application of inflation accounting to public sector deficits as it has been suggested in recent years. Although the theoretical considerations underlying the proposed adjustment for the inflation premium of interest payments are well taken, the new approach has fundamentally focused on measurement issues with little attention paid to the behavioral aspects of microeconomic adjustment. This paper, therefore, raises skepticism about the usefulness of inflation accounting, if such a correction is not accompanied by a conceptual model that links behavioral responses of individuals to balance sheets and other stock variables. In a departure from previous investigations, the paper also points out the possibility that inflation accounting might have more relevant implications for public, rather than private, spending.

Type
Articles
Information
Journal of Public Policy , Volume 8 , Issue 1 , January 1988 , pp. 49 - 60
Copyright
Copyright © Cambridge University Press 1988

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Barro, Robert, Are Government Bonds Net Worth?, Journal of Political Economy, Vol. 82 (No. 6, 1984).Google Scholar
Buiter, Willem H., Measurement or the Public Sector Deficit and Its Implications for Policy Evaluation and Design, Staff Papers, International Monetary Fund (Washington), Vol. 30 (No. 2, June 1983).CrossRefGoogle Scholar
Cukierman, Alex and Mortensen, Jorgen, Monetary, Asserts and Inflation Induced Distortions of the National Accounts – Conceptual Issues and Corrections of Sectoral Income Flows in Five EEC Countries, Economic Papers, Commission of the European Communities, No. 15 (June 1983).Google Scholar
de Leeuw, Frank and Holloway, Thomas M., The High Employment Budget: Revised Estimates and Automatic Inflation Effects, The Survey of Current Business, Vol. 6a (No. 4, 04 1982).Google Scholar
Eisner, Robert, How Real is the Federal Deficit? (New York: The Free Press, 1986).Google Scholar
Eisner, Robert and Pieper, Paul J., A New View of the Federal Debt and Budget Deficits, American Economic Review, Vol. 74 (No. 1, 03 1984).Google Scholar
Feldstein, Martin, Government Deficits and Aggregate Demand, Journal of Monetary Economics, January 1982.CrossRefGoogle Scholar
Haig, Robert, ed., The Concept of Income – Economic and Legal Aspects, The Federal Income Tax (Columbia University Press, 1921).Google Scholar
Haque, Nadeem U. and Montiel, Peter J., Ricardian Equivalence, Liquidity Constraints, and the Yaavi-Blanchard Effect: Tests for Developing Countries (manuscript, International Monetary Fund, December 1987).Google Scholar
Heller, Peter S., Haas, Richard and Mansur, Ahsan, A Review of the Fiscal Impulse Measure with Estimates of the Structural Budget Balance (unpublished, Washington: International Monetary Fund, 1985).Google Scholar
Hicks, John R., Value and Capital (Oxford, 1939).Google Scholar
Mackenzie, George A., Inflation-Adjusting the Budget, Finanzarchiv (forthcoming, 1988).Google Scholar
Modigliani, Franco, Tappelli, T. and Pagano, M., The Impact of Fiscal Policy and Inflation on National Saving: The Italian Case, Banca Nazionale del Lavoro (Rome, 1985).Google Scholar
Simons, Henry C, Personal Income Taxation (University of Chicago Press, 1938).Google Scholar
Tanzi, Vito, Inflationary Expectations, Economic Activity, Taxes, and Interest Rates, American Economic Review, Vol. 70 (No. 1, 03 1980).Google Scholar
Tanzi, Vito, The Deficit Experience in Individual Countries, in Cagan, Phillip, ed., The Economy in Deficit, American Enterprise Institute (Washington, 1985).Google Scholar
Tanzi, Vito, Blejer, M.I. and Teijeiro, M.O., Inflation and the Measurement of Fiscal Deficits (unpublished, Washington: International Monetary Fund, 1986).CrossRefGoogle Scholar
Taylor, C.T. and Threadgold, A.R., Real National Saving and Its Sectoral Composition, Discussion Paper No. 6 (Bank of England, 1979).Google Scholar
Tobin, James, Asset Holdings and Spending Decisions, in Essays in Economics, Vol. 1, Chapter 5 (Chicago, 1971).Google Scholar