DEFICIT

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.

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.

Government Deficit Financing and Stabilisation
Lok Sang Ho, Journal: Journal of Economic Studies
ISSN: 0144-3585 DOI: 10.1108/eb002679
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”.

Alternative Modes of Deficit Financing and Endogenous Monetary and Fiscal Policy 1923-1982
Turnovsky, Stephen J. and Mark Wohar
Journal of Applied Econometrics, Vol. 2, No. 1, February 1987, pp. 1-25.
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 The most important conclusion is that long-run monetary neutrality properties shown to exist over the latter period are not intrinsic to the economy, but rather are the result of the stabilization policies being conducted over that period.

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, Vol. 21, No. 1, January-June 2008
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. The paper suggests that Nigeria should reduce and possibly avoid extra-budgetary spending in order to cut the crowding out effects of deficit funding as well as avert future debt crisis.

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