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Inflation adjusted nominal deficit: a note on Robert Barro’s definition

Déficit nominal ajustado à inflação: uma nota sobre a definição de Robert Barro

ABSTRACT

This note discusses the concept of ‘inflation adjusted nominal deficit’ proposed by Robert Barro in light of a stock-flow consistent real deficit. It is argued that the calculation proposed by the author violates the principle of stock-flow consistency and leads one to the erroneous interpretation that a rise in the rate of inflation de- creases the government deficit in nominal terms.

KEYWORDS:
Inflation; nominal deficit; stock-flow

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