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Impact of fiscal deficit on inflation in Sri Lanka: an econometric time series analysis
[journal article]
Abstract There is a relationship between the fiscal deficit and inflation, which was confirmed empirically in several studies conducted in many countries. Sri Lanka has been encountering the problem of inflation for the recent years. But in Sri Lanka, this proposition has not yet been studied scientifically.... view more
There is a relationship between the fiscal deficit and inflation, which was confirmed empirically in several studies conducted in many countries. Sri Lanka has been encountering the problem of inflation for the recent years. But in Sri Lanka, this proposition has not yet been studied scientifically. Therefore, this study was going to fill this gap. The objective of this study was to test the impact of fiscal deficit on inflation in Sri Lanka. For this study, the annual time series data were used during the period of 1959 to 2013. The fiscal deficit, exchange rate, government expenditures and import outflow were used as independent variables while the Colombo consumer price index was considered as dependent variable. In addition, the multiple regressions model was used to test the impact of fiscal deficit on inflation. Based on the regression results, the fiscal deficit preserved the positive relationship with inflation in Sri Lanka at one percent significant level. Therefore, this study confirmed that the fiscal deficit accelerates the inflation in Sri Lanka.... view less
Keywords
revenue; Sri Lanka; national state; expenditures; analysis; time series; regression; impact; inflation; budgetary policy; deficit
Classification
Economic Policy
Public Finance
Document language
English
Publication Year
2016
Page/Pages
p. 8-13
Journal
International Letters of Social and Humanistic Sciences (2016) 70
ISSN
2300-2697
Status
Published Version; peer reviewed