Fiscal Policy-Inflation Nexus: Evidence from Tunisia

This study examines the relationship between fiscal policy and inflation volatility in Tunisia from 1998 to 2023. Using advanced econometric techniques, including the Autoregressive Distributed Lag (ARDL) model, the study analyses the impact of government expenditure, government revenue, money supply, balance of trade, and budget deficits on inflation using EViews 12. Key findings highlighting a significant positive relationship between budget deficits and inflation, indicating that fiscal imbalances are a major driver of inflationary pressures in Tunisia. Moreover, the study found that Money Supply, Government Revenue, Government Expenditure, and Balance of Trade do not have a statistically significant long-term impact on inflation in Tunisia. The study underscores the importance of coordinated monetary and fiscal policies in managing inflation and provides insights applicable to other developing economies facing similar challenges.