How long can inflation tax compensate for the loss of government revenue in war economies? Evidence From Burundi.

Working paper

The paper shows that civil war in Burundi in the 1990s has provoked an unprecedented decline in government revenue. Both foreign aid transfers and revenue from domestic sources dried up, inducing the government to rely more on inflation tax. Using quarterly data covering the period from 1980:1 to 2002:4 to measure the sensitivity of money demand to inflation we find that the long-run semi-elasticity of inflation to real money in circulation trebled between the pre-war to the war period. The r...

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Authors: Nkurunziza, J

• Publisher: CSAE (University of Oxford)
• Series: Working paper series
• Publication date: 2004-01-01
• Language: English