The Fiscal Theory of the Price Level in Sub-Saharan Africa: A Structural Break Analysis

<p>In this paper, I provide empirical evidence of the fiscal theory of the price level (FTPL) using sub-Saharan African countries. While the traditional view of the inflation is driven and explained by the quantity theory of money, the FTPL argues that the government deficit has an impact on the price level. However, the empirical literature of the FTPL is not extensive. This paper adds to this literature in that it substantiates this theory. I determine using primary balance and liabilities data when available to classify a country as under either a monetary dominant regime (the traditional view) or under a fiscally dominant regime (FTPL). Additionally, using the inflation data from these countries I perform a structural break analysis to determine whether a country experienced a significant change in regime between 1980 and 2005. I find that the U.S. immediately after World War II experienced a period that had the characteristics of a fiscally dominant regime. I also find that after the Accord of 1951, the regime switched to a monetary regime because the structural break analysis of the U.S inflation data detects a significant break year in 1952. In sub-Saharan African countries, Kenya switched from a monetary dominant regime to a fiscally dominant regime after 1994, its structural break year.</p>

Name thesis:degree_name

Master of Science (MS)

Level thesis:degree_level

Thesis - Open Access

Discipline thesis:degree_discipline

Economics

Year dc:date.available

2017

Author dc:creator

• Tchamda, Christian

Contributors dc:contributor

• Joseph Santos

• Economics
• Macroeconomics
• Regional Economics

Licence

• http://rightsstatements.org/vocab/InC/1.0/

Language dc:language

en

Repository record dc:identifier

https://openprairie.sdstate.edu/etd/1139

OAI identifier oai:identifier

oai:openprairie.sdstate.edu:etd-2140