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Does Political Instability Lead to Higher Inflation? A Panel Data Analysis - Semantic Scholar
Fiscal deficit and inflation rate in selected African Regional Blocs: A comparative analysis. Michael A. Registered: Ebenezer Adesoji Olubiyi. This study investigates the effect of fiscal deficit on inflation rate in selected African countries.
The data collected spans 22years from to The selection of these countries was based on the countries with highest fiscal deficit or inflation rate in each of the geo-political zones in Africa. Based on the nature of the data, an autoregressive distributed lag ARDL in the context of Keynesian model of aggregate expenditure was specified and estimated.
The result shows that inflation effect of fiscal deficit is country specific and period specific.
22.3 How the U.S. and Other Countries Experience Inflation
Out of the five countries considered, it is only in Nigeria and South Africa that inflation is affected positively by fiscal deficit in the short run. In the long run, Nigeria is the only country where inflation rate is affected positively by fiscal deficit.
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In Egypt, there was no short run effect of fiscal deficit while in Kenya, there was negative effect. Recommendations were proffered based on these results.
Ebenezer A. Handle: RePEc:ksp:journ2:vyip as.
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More about this item Keywords Inflation ; Fiscal deficit ; Autoregressive distributed lag. Banks then decrease key interest rates to stimulate lending activity, and vice versa, considering other macroeconomic indicators.
Inflation expectation is high now that several macroeconomic indicators showed a surge in prices and spending. The probability of another rate hike soon is high until the inflation is under target and business sentiment turns positive.
Sectors such as consumer staples and utilities are expected to perform better as the US dollar rises as well. However, as the dollar gains strength, it affects other economies and currencies globally.
The exchange rate between the euro and the US dollar is getting closer to parity with the weak economic prospects and political turmoil in Europe. The high expectation of an interest rate hike helped fuel this strength in the dollar.