CEU Electronic Theses and Dissertations, 2021
| Author | Zainidinov, Mukhammed |
|---|---|
| Title | How Much Does Fiscal Policy Contribute to Explaining Inflation in Kyrgyzstan? |
| Summary | Despite many reforms in the public finance sector and improvement of tax administration, the budget deficit in Kyrgyzstan remains chronic from the first year of getting independence. Kyrgyzstan has faced budget deficits almost in each year between 1990-2020. The annual average government budget balance to GDP was -3.44% for the period 1990-2020. Along with the budget deficit, one of the most critical problems in Kyrgyzstan’s market economy is inflation. The main factors as the collapse of the Soviet Union, the transition of the Kyrgyz economy from a socialist to a market economy, and the deep decline in the economy, led to hyperinflation. Not taking into account the transition period, the average annual inflation rate in Kyrgyzstan was 10.67% for 1995-2020. Therefore, the analysis of the causal effect of the budget deficit on inflation seems to be urgent. I employ the autoregressive distributed lag (ARDL) model to empirically estimate the short-run and long-run causal effects of the budget deficit on the inflation rate in Kyrgyzstan using quarterly data over the period 2001:1-2020:4. The analysis results show that the budget deficit positively affects the inflation rate both in the short-run and long-run periods. In the short run, a one percent increase in the budget deficit to GDP ratio increases the annual inflation rate by 0.245 percent. In the long run, a one percent increase in the budget deficit to GDP ratio raises the yearly inflation rate by 0.635 percent. |
| Supervisor | Weyerstrass, Klaus |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2021/zainidinov_mukhammed.pdf |
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