Investigating the Impact of Inflation on Government Budget Deficit in Selected Developed and Developing Countries Despite the Corona Virus Outbreak: A Quantile Panel Approach

Subject Areas : Financial Economics

حبیب آقاجانی ¹ , yasin shahbazi ² , reza ranjpour ³

1 - گروه اقتصاد،دانشکده اقتصاد و مدیریت دانشگاه تبریز/ایران
2 - Ph.D. student of Financial Economics, Ares International Campus (Jolfa), University of Tabriz
3 - Associate Professor of Economics, Faculty of Economics and Management, Tabriz University,

Received: 2022-11-27 Accepted : 2024-12-02

Keywords: : Budget deficit, Inflation, Quantile panel, Corona epidemic.,

Abstract :

Inflation affects the budget deficit in two dimensions: income (Tanzi hypothesis) and expenses (Patinkin hypothesis). Understanding how inflation affects the government budget deficit in different countries can provide the basis for controlling inflation and reducing the budget deficit. To this end, the present study simultaneously examines the impact of inflation on government budget deficits in selected developed and developing countries using annual data for the period 2019-2000 despite the coronavirus epidemic in November 2019. For this purpose, first using the Quantile panel, it has studied the effect of inflation on the budget deficit in developing countries (almost with high inflation) and then developed countries (low inflation). The results of model estimation in both groups of countries show the effect of inflation on the budget deficit, but in two different cases. In other words, this effect in developed countries indicates that both the Tanzi effect and the Patinkin effect have been established in these countries, but in the group of developing countries, the Tanzi effect due to Patinkin is predominant. In fact, the results in countries with higher inflation show that as a result of rising inflation, the government budget deficit has increased