<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This paper examined the impact of fiscal deficit on inflation in Namibia. The paper employed Autoregressive Distributed Lag Model (ARDL) and Granger causality approach using quarterly data for the period 2002 - 2017. Empirical results showed evidence of a long run positive effect of fiscal deficit on inflation in Namibia. This suggests that fiscal deficit has a direct effect on inflation in Namibia. The study also found a unidirectional causality running from fiscal deficit to inflation in Namibia. The study confirmed that South Africa’s prices have positive effect on inflation in Namibia. The key policy implication drawn for the result is that if not contained, high negative fiscal balances could impair the monetary policy objective of price stability. It is therefore advised that fiscal and monetary policies need to be well coordinated to bring fiscal deficit within acceptable level. Given that the main monetary policy goal in Namibia is to achieve and maintain price stability, the results in this study suggest that monitoring budget deficits and price developments in South Africa to develop informed policies is one way to achieve this objective.</p></abstract>

This paper examined the impact of fiscal deficit on inflation in Namibia. The paper employed Autoregressive Distributed Lag Model (ARDL) and Granger causality approach using quarterly data for the period 2002 - 2017. Empirical results showed evidence of a long run positive effect of fiscal deficit on inflation in Namibia. This suggests that fiscal deficit has a direct effect on inflation in Namibia. The study also found a unidirectional causality running from fiscal deficit to inflation in Namibia. The study confirmed that South Africa’s prices have positive effect on inflation in Namibia. The key policy implication drawn for the result is that if not contained, high negative fiscal balances could impair the monetary policy objective of price stability. It is therefore advised that fiscal and monetary policies need to be well coordinated to bring fiscal deficit within acceptable level. Given that the main monetary policy goal in Namibia is to achieve and maintain price stability, the results in this study suggest that monitoring budget deficits and price developments in South Africa to develop informed policies is one way to achieve this objective.

The Impact of Fiscal Deficit on Inflation in Namibia

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"The Impact of Fiscal Deficit on Inflation in Namibia"}

This paper examined the impact of fiscal deficit on inflation in Namibia. The paper employed Autoregressive Distributed Lag Model (ARDL) and Granger causality...

The Impact of Fiscal Deficit on Inflation in Namibia

Published Online: Jan 26, 2021

Page range: 141 - 164

DOI: https://doi.org/10.2478/jcbtp-2021-0007

Keywords
fiscal deficit, inflation, Namibia, ARDL, cointegration

© 2021 Joel Hinaunye Eita et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

The Impact of Fiscal Deficit on Inflation in Namibia

Published Online: Jan 26, 2021

Page range: 141 - 164

DOI: https://doi.org/10.2478/jcbtp-2021-0007

Keywordsfiscal deficit, inflation, Namibia, ARDL, cointegration

© 2021 Joel Hinaunye Eita et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
fiscal deficit, inflation, Namibia, ARDL, cointegration