Effects of Inflation on Ivorian Fiscal Variables: An Econometric Investigation

"The purpose of this paper has been to develop, estimate and simulate a macro-econometric model for Cote d'Ivoire. The parameter estimates have been used to analyse the effects of alternative GDP policy measures on the country's economy.The key policy implications of the model can be summarized as follows. First, Cote d'Ivoire decision planners adjust the levels of revenues and expenditures when inflation is becoming more and more important. The basic hypothesis was that, while government expenditures rise concomitantly with inflation, government revenues tend to fall behind in real terms owing to collection lags. The financing of this inflation-induced deficit would then increase the money supply and generate further inflation. The second major implication of the model relates to time-dependent adjustment speeds. In general in Cote d'Ivoire, expenditures adjust more rapidly than revenues. Finally, although the framework developed in this paper provides many insights, there are several areas in which further work is both necessary and desirable. The estimation results do not provide strong support regarding the existence of policy-induced disequilibrium between revenues and expenditures."