Econometric Modeling

Using ECOWAS as a focal point, the paper sets out to empirically investigate the relationship between budget deficit and inflation. According to theory, fiscal imbalances result in inflation problem as shown by Nigerian experience of the late 90s. The findings from the empirical studies reveals a strong evidence that a budget deficit financed through monetarisation and a rising money supply will always lead to inflation. The inflationary effect of budget deficit depends on the means by which the deficit is financed and its impact aggregate demand. In this study, annual budget deficits and inflation relationships are studied by utilizing the Larsson et al, (2008) tes