Working Paper
Inflation and the Size of Government
Abstract: It is commonly supposed in public and academic discourse that inflation and big government are related. We show that economic theory delivers such a prediction only in special cases. As an empirical matter, inflation is significantly positively related to the size of government mainly when periods of war and peace are compared. We find a weak positive peacetime time series correlation between inflation and the size of government and a negative cross-country correlation of inflation with non-defense spending.
Keywords: Inflation; Government size; Central bank independence;
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File(s): File format is application/pdf http://www.federalreserve.gov/pubs/feds/2002/200201/200201pap.pdf
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Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: Finance and Economics Discussion Series
Publication Date: 2001-11
Number: 2002-01
Pages: 44 pages