The Impact of Fiscal Deficit on Inflation Rate - Empirical Evidence Case of Eurozone

Abstract

The purpose of this working paper is to investigate if determinants have an impact on inflation rate in Eurozone Countries by using times series data for 17 countries from year 1997 to 2017, in yearly basis in total 375 observations. The study used quantitative research approach and secondary data and is analyzed by using linear regression model measures: Inflation rate as a dependent variable, and five independent variables such us: GDP to growth rate, Deficit to GDP rate, Public debt to GDP rate, Government bond interest rate and Unemployment rate. Linear regression model was applied to investigate the impact of GDP to growth rate, deficit to the GDP rate, Public debt to the GDP rate, Government bond interest rate, and Unemployment rate to the dependent variable Inflation rate. From the Linear Regression Model coefficients for inflation rate as a dependent variable shows that three of five variables have a significance one with negative significance and two positive significance. The empirical result shows that the three of five ratios that we mentioned above have a strong influence on the Inflation rate.