Fiscal difficulties frequently lie behind numerous features and problems of financial systems in developing countries. Many developing country governments find it virtually impossible to satisfy their intertemporal budget constraint with conventional tax revenue. Hence, they rely on revenue from...

In this article, I examine the relationship between monetary and fiscal policies in a panel of 70 developing countries. I find that the size of the government's defict and the methods by which it is financed are strongly related to monetary policy reactions to increases in both government credit...