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Do fiscal deficits cause inflation? Evidence from Suriname
Gavin Ooft* 
Article | Year: 2025 | Pages: 153 - 179 | Volume: 49 | Issue: 1 Received: February 6, 2024 | Accepted: June 17, 2024 | Published online: March 10, 2025
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FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
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Commodity-price
shock
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Fiscal
shock
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Money
shock
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Exchange
rate shock
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Output
shock
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Inflation
shock
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Fiscal balance
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+/-
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+
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0
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0
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0
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0
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Money supply
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+/-
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-
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+
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0
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0
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0
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Exchange rate
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+/-
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-
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+
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+
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0
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0
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Output growth
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+/-
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+
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-
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-
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+
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0
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Inflation
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+/-
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-
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+
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+
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+
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+
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Source: Author’s elaboration.
Note: Changes reflect year-on-year changes. The market exchange rate entails the USD/SRD exchange
rate on the parallel market. This data is gathered from the CBvS, foreign exchange bureaus, and local
newspapers. In the years before the parallel market emerged, the market exchange rate equalled the
official exchange rate. Sources: Author using data from the CBvS, GBS, Ministry of Finance Suriname, World Bank.
Note: The impulse responses depict responses to SVAR innovations with 95% confidence intervals
using analytical asymptotic standard errors. Source: Author’s calculations.
Note: The impulse responses depict responses to SVAR innovations with 95% confidence intervals
using analytical asymptotic standard errors. Source: Author’s calculations.
Source: Author’s calculations.
Source: Author’s calculations.
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Indicator
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Definition
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Source(s)
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ER
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Year-on-year change in the market exchange rate (in
%)
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Newspapers, CBvS
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FBGDP
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Fiscal balance scaled to nominal GDP (in %)
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Ministry of Finance Suriname, CBvS
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GR
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Volume growth of GDP (in %)
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GBS, CBvS
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INFL
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Year-on-year change in the CPI (in %)
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GBS, CBvS
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M1GDP
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Money supply scaled to nominal GDP (in %)
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CBvS
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XE
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Energy commodity prices (year-on-year change, in %)
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World Bank Prospects Group
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XNE
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Non-energy commodity prices (year-on-year change, in
%)
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World Bank Prospects Group
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ER
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FBGDP
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GR
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INFL
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M1GDP
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XE
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XNE
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Mean
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-2.58
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-5.77
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2.54
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29.15
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29.61
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3.62
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4.40
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Median
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-4.02
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-5.00
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2.80
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8.40
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25.05
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3.61
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4.44
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Maximum
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3.46
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26.60
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19.20
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586.50
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83.78
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5.01
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4.84
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Minimum
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-6.32
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-25.50
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-16.00
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-7.60
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14.88
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2.12
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4.01
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Std.
dev.
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3.56
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8.10
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5.39
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79.15
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16.58
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0.84
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0.22
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Skewness
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0.19
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0.29
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-0.34
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5.93
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1.87
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-0.39
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-0.28
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Kurtosis
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1.31
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6.17
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5.13
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40.95
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5.84
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2.03
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1.97
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Jarque-Bera
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7.83
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27.32
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13.09
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4148.86
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57.90
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4.05
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3.58
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Probability
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0.02
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0.00
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0.00
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0.00
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0.00
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0.13
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0.17
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Observations
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63
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63
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63
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63
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63
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63
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63
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Levels
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ADF
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FBGDP
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M1GDP
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ER
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GR
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INFL
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XE
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XNE
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With
constant
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t-Stat
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-4.18***
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-2.77*
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0.43
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-4.95***
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-5.39***
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-1.07
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-1.51
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Prob.
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0.00
|
0.07
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0.98
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0.00
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0.00
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0.72
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0.52
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With
constant & trend
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t-Stat
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-4.15***
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-2.89
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-2.16
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-5.35***
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-5.42***
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-2.10
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-0.72
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Prob.
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0.01
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0.17
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0.50
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0.00
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0.00
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0.54
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0.97
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First
difference
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ADF
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d(FBGDP)
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d(M1GDP)
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d(ER)
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d(GR)
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d(INFL)
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d(XE)
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d(XNE)
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With
constant
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t-Stat
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-11.47***
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-5.24***
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-4.55***
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-9.26***
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-8.38***
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-7.20***
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-7.47***
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Prob.
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0.00
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0.00
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0.00
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0.00
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0.00
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0.00
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0.00
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With
constant & trend
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t-Stat
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-11.38***
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-5.20***
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-4.73***
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-9.17***
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-8.31***
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-7.13***
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-7.63***
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Prob.
|
0.00
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0.00
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0.00
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0.00
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0.00
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0.00
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0.00
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Source: Author’s calculations.
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Levels
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PP
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FBGDP
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M1GDP
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ER
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GR
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INFL
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XE
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XNE
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With
constant
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t-Stat
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-4.12***
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-2.05
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0.81
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-4.88***
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-5.33***
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-1.07
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-1.48
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Prob.
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0.00
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0.27
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0.99
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0.00
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0.00
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0.72
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0.54
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With
constant & trend
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t-Stat
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-4.09**
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-2.19
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-1.95
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-5.30***
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-5.36***
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-2.18
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-1.09
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Prob.
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0.01
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0.49
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0.62
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0.00
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0.00
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0.49
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0.92
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First
difference
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PP
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d(FBGDP)
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d(M1GDP)
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d(ER)
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d(GR)
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d(INFL)
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d(XE)
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d(XNE)
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With
constant
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t-Stat
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-14.83***
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-5.37***
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-4.48***
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-17.43***
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-35.37***
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-7.20***
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-6.97***
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Prob.
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0.00
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0.00
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0.00
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0.00
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0.00
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0.00
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0.00
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With
constant & trend
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t-Stat
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-14.08***
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-5.33***
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-4.66***
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-17.24***
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-34.90***
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-7.13***
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-7.11***
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Prob.
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0.00
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0.00
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0.00
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0.00
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0.00
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0.00
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0.00
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Notes: PP denotes the Phillips-Perron unit root test. (*) Significant at the 10%; (**) Significant at the 5%; (***) Significant at the 1%. Source: Author’s calculations.
Note: The impulse responses depict responses to SVAR innovations with 95% confidence intervals
using analytical asymptotic standard errors. Source: Author’s calculations.
Note: The bias-adjusted impulse response functions present the responses of inflation to various
shocks using Kilian’s unbiased bootstrap with 500 bootstrap repetitions and 500 double bootstrap
repetitions. The shaded area corresponds to a 95% confidence interval. Source: Author’s calculations.
Note: The bias-adjusted impulse response functions present the responses of inflation to various
shocks using Kilian’s unbiased bootstrap with 500 bootstrap repetitions and 500 double bootstrap
repetitions. The shaded area corresponds to a 95% confidence interval. Source: Author’s calculations.
Source: Author’s calculations.
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Null
hypothesis: Residuals are multivariate normal
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Equation
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Jarque-Bera
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df
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Prob.
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1
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9.88
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2
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0.01
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2
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19.21
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2
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0.00
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3
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1.77
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2
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0.41
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4
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1.32
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2
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0.52
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5
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3.83
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2
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0.15
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6
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3.24
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2
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0.20
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Joint
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39.27
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12
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0.00
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.
Table 1Expectation matrix DISPLAY Table
Figure 1Graphs of variables (in %) DISPLAY Figure
Figure 2Responses of inflation: model with energy prices (in %) DISPLAY Figure
Figure 3Responses of inflation: model with non-energy prices (in %) DISPLAY Figure
Figure 4Variance decomposition of inflation: model with energy prices (in %) DISPLAY Figure
Figure 5Variance decomposition of inflation: model with non-energy prices (in %) DISPLAY Figure
Table A1Definitions and sources of variables DISPLAY Table
Table A2Descriptive statistics DISPLAY Table
Table A3ADF unit root test results DISPLAY Table
Table A4PP unit root test results DISPLAY Table
Figure A1Impulse responses to fiscal shocks (in %) DISPLAY Figure
Figure A2Bias-adjusted impulse responses with energy prices (in %) DISPLAY Figure
Figure A3Bias-adjusted impulse responses with non-energy prices (in %) DISPLAY Figure
Figure A4Inverse roots of autoregressive characteristics polynomial DISPLAY Figure
Table A5VAR residual normality tests DISPLAY Table
* The author would like to thank to two anonymous reviewers for their valuable help in the completion of this article. The views expressed in this paper are solely those of the author and do not necessarily represent those of organizations to which he is affiliated.
1 Non-Ricardian fiscal policies refer to policies where the government is not committed to finance its debt. The government may even opt to default upon its debt obligations, or the central bank may deflate the debt by printing money, inducing inflation.
2 The sample does not include Suriname.
3 As Suriname has no policy interest rate, this variable is omitted from the empirical analysis.
4 The Energy Price Index contains prices of coal, crude oil, natural gas, and liquefied natural gas.
5 Non-Energy Price index contains prices of agricultural products, fertilizers, metals, and minerals.
6 Some mean impulse responses seem to oscillate and not approach the steady state in the medium term. This could result from outliers. Nonetheless, the models are just specified and free from serial correlation.
7 Wages, goods & services, subsidies & transfers, interest expenses, and public investments.
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March, 2025
I/2025
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