Modes de nancement des d e cits budg etaires et in ation dans les pays de la Communaut e de l'Afrique de l'Est (CAE) : Estimation par les donn ees de Panel

Abstract

This work analyses the effects of the modes of fi nancing budget de ficits on inflation in the countries of the East African Community. To fi nance budget de ficits, 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, in ation rate, real interest rate, exchange rate and scal 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 defi cits have positive and signi cant 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 signi cantly affect the inflation rate, and control the money supply more tightly because of its effects on the stability of the general price level.