BUDGET DEFICIT AND ITS EFFECTS ON INFLATION RATE (NEW EVIDENCE FROM ARGENTINA) MONETARY VISION

Abstract

This research explores the mechanism by which the general budget deficit affects the inflation rate in Latin America, taking Argentina as a model for these countries for the period (1990-2020). To re-test a hypothesis that has often been raised in economic literature, that there are direct effects of the budget deficit on the inflation rate, the researchers used the (ARDL) model to support and prove the hypothesis from which it was based in a country that suffers from major monetary and financial problems, describing this model as more consistent with the research data after conducting the unit root test as well as co-integration. As a result, the research came up with results that supported the research hypothesis, as an increase in the budget deficit by (1%) leads to a rise in the inflation rate by (1.35%), which supports the previous studies of this study and which makes the direct effect of the budget deficit on the inflation rate closer to the irrefutable truth.