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 banks 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 whats absolutely
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
Alternative Modes of Deficit Financing and Endogenous Monetary and Fiscal Policy
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
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.