Abstract

Relationship of budget deficit, inflation and value of money are some
controversial issues mostly discussed in macroeconomics as a main
concern of policy makers and economists in both developed and
developing countries. Policy of budget deficit is known as one of the
fiscal policies resort widely applied in most countries specifically in
Iran. What is the relationship between budget deficit and
macroeconomics variable, as the main focus of this study, has
remained unanswered for a long time. Based on empirical studies,
statistics show that the budget deficit and inflation relationship are
not the same among countries sampled in this research. This research
paper tends to analyze and examine the theoretical and empirical
relationship of budget deficit and inflation during ١٩٧٦ – ٢٠٠٥.
Applying econometrics tests to evaluate the correlation between
inflation and budget deficit, this relationship does not find any
statistically significant variation.