Deficit is the gap between governments' revenues, from taxes and charges, and their expenditures, on programs, infrastructure, and debt financing. Deficit is the amount of a deficiency, especially of money. Deficit is an excess of expenditure or liabilities over income or assets. Deficit financing is the financing of deficit spending. Deficit spending is the government spending in excess of revenue, that is, of funds raised by borrowing, not by taxation. A positive balance is called a government budget surplus, and a negative balance is a government budget deficit. The government budget surplus or deficit is a flow variable, since it is an amount per unit per year. Thus it is distinct from government debt, which is a stock variable since it is measured at a specific point in time. The cumulative flow of deficits equals the stock of debt.
INFLATIONARY EFFECTS OF BUDGET DEFICIT FINANCING IN CONTEMPORARY ECONOMIES, ANGELA BOARIU, IRINA BILAN. Abstract: This paper tries to analyse the relations existing between the different ways of financing budget deficit and inflation, underlining the terms of these relations and the involved social and economic effects. An important source of inflation is considered to be the financing of budget deficits by direct appeal to the central bank’s resources, nowadays forbidden by law in most countries for its negative impact. Nevertheless, inflation can also appear as a consequence of debt financing of the budget deficit, considered acceptable in the contemporary society, when it indirectly involves the increase in the amount of money available to the economy above what’s absolutely necessary.
Alternative Modes of Deficit Financing and
Endogenous Monetary and Fiscal Policy 1923-1982
Turnovsky, Stephen J. and Mark Wohar.
Abstract: This paper first investigates the effects of alternatives modes of deficit
financing on the unemployment rate, inflation rate, and the real interest rate, within the
framework of a small complete macroeconomic model. Secondly, it examines the nature of
monetary and fiscal reaction functions. The two periods 1923- 1960 and 1961-1982 are
considered, with substantial differences in behavior and policy being shown to exist
between them.
Deficit Financing and its Inflationary Impact on Developing Economies: Nigerian Economy in Perspective - A. Isenmila Patience, University of Benin - Department of Accounting, Journal of Financial Management and Analysis.
Abstract: Deficit financing seems to present a positive inflationary impact on developing economies particularly Nigeria. When there is a budget deficit, government finds ways of financing the deficit through borrowing from commercial and merchant banks or from the non-banking public and through the issue of short-term bonds and monetary instruments. The use of deficit financing for the pursuit of fiscal policies often leads to increased danger in an economy.
This paper examines the extent to which deficit financing has affected the Gross Domestic product (GDP) of Nigeria, its impact on the continuous rise in prices of goods and services of the country as a measure of the consequences of extra budgetary spending. It also reviews the effectiveness of the strategic options adopted to eliminate the constant reoccurrence of deficit financing in Nigeria.
Government Deficit Financing and Stabilisation
Lok Sang Ho, Journal: Journal of Economic Studies. Abstract: The US federal deficit has, over the years, remained a subject of widespread
concern and controversy. Diverse views continue to be expressed on such questions as
whether the deficit matters, whether it is the inflation-adjusted deficit that matters,
whether bond-financed deficits are inflationary, and whether it is only deficits that are
financed by money creation which are inflationary. Against this background, few would
disagree with Boskin (1982) that “progress in improving our understanding of the role
of the budget deficit in economic behavior and performance… is an urgent research
priority.”