Prague Economic Papers 2013, 22(2):147-162 | DOI: 10.18267/j.pep.445

A Dynamic Panel, Empirical Investigation on the Link between Inflation and Fiscal Imbalances. Does Heterogeneity Matter?

Avgeris Nikolaos, Katrakilidis Constantinos
Aristotle University of Thessaloniki Greece, Department of Economics, Thessaloniki 54124, Greece (katrak@econ.auth.gr, navgeris@econ.auth.gr).

This study empirically attempts to unveil the contradictive findings regarding the relationship between fiscal imbalances and inflation in the context of the latest theoretical indications. The empirical analysis covers the period of 1970 to 2009 and applies dynamic panel techniques in a pool of 52 countries that comprises 19 developed and 33 developing ones. This segmentation is applied to illustrate the groups' specific features and the implications of heterogeneity. The findings provide supportive evidence for developing countries. We also find a significant degree of heterogeneity between the groups and the statistical significance of the relationship between fiscal imbalances and inflation in the case of developed countries cannot be ratified.

Keywords: inflation, fiscal imbalances, heterogeneity, dynamic panel, GMM
JEL classification: C23, C52, E31, E42, H62

Published: January 1, 2013  Show citation

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Nikolaos, A., & Constantinos, K. (2013). A Dynamic Panel, Empirical Investigation on the Link between Inflation and Fiscal Imbalances. Does Heterogeneity Matter? Prague Economic Papers, 22(2), 147-162. doi: 10.18267/j.pep.445
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