This paper examines the proposition that budget deficits are a major cause of inflation. Economic theory does not unconditionally support the proposition, and available empirical evidence does not support the proposition. During periods of expansion, 1949–1973, the increases in the money...

This article analyzes a recent attempt to test the hypothesis that budget deficits are a major cause of inflation. It finds that the proposed tests are inappropriate for several reasons; chiefly that there is a reverse causation phenomena present for economies with nonindexed progressive tax...