Modes de financement des déficits budgetaires et inflation dans les pays de la Communauté de l'Afrique de l'Est (CAE) : Estimation par les données de Panel

Abstract

This work analyses the effects of the modes of financing budget deficits on inflation in the countries of the East African Community. To finance budget deficits, the government uses three methods of financing : debt, taxes and money creation. The data used come from the World Bank's World Development Indicators database and the African Development Bank's AFDB Socio Economic Database . They include public debt as a percentage of GDP, money supply growth rate, real GDP growth rate, tax revenue as a percentage of GDP, inflation rate, real interest rate, exchange rate and fiscal balance as a percentage of GDP for the EAC countries. This study employs panel data and uses static model estimation. The results of the econometric estimations indicate that all modes of financing budget deficits have positive and significant effects on inflation in the EAC countries. This study suggests that EAC countries should direct debt incurred to investment projects aimed at increasing output, promote optimal taxation that does not significantly affect the inflation rate, and control the money supply more tightly because of its effects on the stability of the general price level.