ECON Research Paper Example | Topics and Well Written Essays - 1000 words

ECON - Research Paper ExampleHypothetically, the relationship is that with a calculate shortfall, there is likelihood that the regimen may pay this deficit through printing of more money and pumping it into the parsimoniousness. This leads to more money into the economy leading to inflation. Since this printing of money is not going concordant with production of goods and services. This concept is popular with growing countries where financial markets are not well developed to finance the deficit or when the public lacks sufficiency confidence in the goernment of the day to invest in the g everywherenments debt, or when the primordial bank is not independent and therefore easily manipulated by the government to finance its debts. information pointing on the relationship amidst budget deficit and inflation are hard to come by since distinguishable countries give varying statistics. Some show a direct relationship while some do not hence this research. This research will use t he statistics of the join States budget deficit and inflation and United Kingdom deficit and inflation. UK and US financials The united kingdom and the united states are considered to be relatively economically stable countries with independent central banks and relatively stable financial markets. This means the central bank is nether no influence by the political class and financial markets may be used to finance budget deficits. This leaves the budget deficit and inflation as independent entities and it would therefore be interesting to suffer what other relationship there may be between the cardinal concepts. Financial data of these two countries will be used in this paper. Budget Deficit or Surplus Data US Surplus or Deficit data The above chart shows the US deficit and surplus over a period of 20 years. The fluctuation over the years may indicate change in political environment and shift in policies. UK Surplus or Deficit data The above graph shows similar data over the s ame period of time but of the UK. The figures show huge variations between the two countries. It may seem the two are exact opposites of each other. For the rise of one over a given period, a fall of another within the same period is reflected. Inflation Data US inflation rates The inflation data chosen is of the same period of years, 1982-2012. The figures are as well as fluctuating over the years, this too may be collectible to changing monetary policies, and political date of reference shifts. UK inflation rates The inflation figures between US and the UK are not as varied as the budget deficit figures. The figures seem to go in tandem with each other. This may be due to economic common factors that lead to such. The common factors may be global, bearing that the US and the UK control a significant portion of the worlds economy. Budget deficit/inflation figures US Budget deficit/Inflation The US budget deficit and inflation figures show a relationship between the two. A rise i n one shows a rise in the other. This may indicate lack of dependable independence of the central bank. However, lagged the relationship may be, there is a relationship. UK budget deficit/Inflation The UK budget deficit and inflation figures show a more lagged relationship. The relationship between the two graphs is not musing of an active relationship between the two figures. It may indicate a very independent central bank. However, it is important to consider the difference in the economic operation between the two c