Fiscal Dominance and Inflation in the Democratic Republic of the Congo

November 1, 2005

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Jean-Claude Nachega. Fiscal Dominance and Inflation in the Democratic Republic of the Congo, (USA: International Monetary Fund, 2005) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the fiscal dominance hypothesis in the Democratic Republic of the Congo (DRC) during 1981-2003, using multivariate cointegration analysis and vector errorcorrection modeling. Empirical results point to strong and statistically significant long-run relationships between budget deficits and seigniorage, and between money creation and inflation. The long-run inflationary impact of budget deficits is robust to the inclusion of output growth or velocity in the inflation and monetary growth equations. The paper offers some policy recommendations for long-term price stability in the DRC.

Subject: Budget planning and preparation, Currency issuance, Government debt management, Inflation, Monetary base

Keywords: Fiscal deficit, Money demand, Rate of inflation, Real GDP, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/221
Stock No:

WPIEA2005221
ISBN:

9781451862409
ISSN:

1018-5941

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