I summarized the following studies that covers the this research
question 1: You will not use my words but rewrite these studies in your own
words
"Government Spending and Inflation in the United States: An Empirical Analysis" by Christina D.
Romer and David H. Romer, published in the Quarterly Journal of Economics in 2010.




The authors use historical data and a structural vector autoregression (SVAR) model to analyze
the impact of changes in government spending on inflation. They aim to understand how
variations in government expenditures affect price levels in the U.S. economy.
The study finds that an increase in government spending leads to a statistically significant and
positive response in inflation. In other words, when the government increases its spending on
goods, services, and various projects, it has a tendency to drive up inflation in the short run.
The findings provide important insights into the fiscal policy implications for inflation dynamics
in the United States. Policymakers can use this information to better understand how changes in
government spending can influence inflation rates and make informed decisions regarding fiscal
policy measures.
Overall, the article contributes to the literature on the relationship between government
spending and inflation in the U.S., adding to the understanding of the macroeconomic effects of
fiscal policies on price levels in the country.
"The Impact of Government Spending on Inflation in Emerging Market Economies: Evidence from
Brazil, India, and South Africa" by Prachi Mishra and Peter Montiel, published in the Journal of
Development Economics in 2012.




The authors employ panel data analysis to investigate the effects of government spending on
inflation rates in these countries. By using data from different time periods and controlling for
other relevant factors, they aim to provide a comprehensive understanding of how government
expenditures influence price levels in emerging market economies.
The study reveals that government spending has a significant positive impact on inflation in
Brazil and India. When the government increases its spending, it tends to push up the general
price level in these countries. However, the effect of government spending on inflation is found
to be weaker in South Africa compared to Brazil and India.
The findings have important policy implications for the economic management of emerging
market economies. Understanding the link between government spending and inflation can help
policymakers make informed decisions regarding fiscal policies to maintain price stability while
promoting economic growth.
Overall, the article contributes valuable evidence to the existing literature on the impact of
government spending on inflation in emerging market economies, offering insights specific to
Brazil, India, and South Africa. These findings can aid policymakers in formulating appropriate
fiscal policies to manage inflationary pressures and foster sustainable economic development in
these countries.
"Government Spending and Inflation in Asian Emerging Market Economies" by Muhammad Omer and
Jakob de Haan, published in Emerging Markets Finance and Trade in 2017.




Through the utilization of panel data analysis, the authors aim to discern the impact of
government spending on inflation in these economies. By examining data from different time
periods and controlling for other relevant variables, the study seeks to provide a comprehensive
understanding of how changes in government expenditures influence price levels in the selected
Asian countries.
The findings reveal that government spending has a positive and statistically significant effect on
inflation in the analyzed Asian emerging market economies. When the government increases its
spending on goods, services, and development projects, it tends to exert upward pressure on the
general price level in these countries.
This study's results offer valuable insights into the implications of fiscal policy on inflation
dynamics in Asian emerging market economies. Policymakers can utilize this information to
make well-informed decisions concerning fiscal measures and inflation management strategies
in these countries.
In conclusion, the article contributes significant evidence to the existing literature regarding the
impact of government spending on inflation in Asian emerging market economies. The findings
underscore the importance of considering fiscal policies in the context of managing inflation and
promoting economic stability in these regions.
"Government Spending and Inflation Dynamics: Evidence from Advanced Economies" by Alberto
Alesina and Silvia Ardagna, published in the Quarterly Journal of Economics in 2013.




Using time-series analysis, the authors aim to examine the impact of changes in government
spending on inflation over the long run in these advanced countries. By analyzing historical data
and controlling for other relevant factors, the study seeks to provide insights into how
government expenditures affect price levels in these economies.
The findings of the study indicate that an increase in government spending leads to higher
inflation in the short run. However, the effect diminishes over the long run, suggesting that the
relationship between government spending and inflation dynamics is not persistent in advanced
economies.
These results provide significant implications for policymakers in advanced economies, as they
highlight the temporary impact of fiscal policy on inflation. Policymakers can utilize this
information to better understand the trade-offs between government spending and inflation
management in these economies.
In conclusion, the article contributes valuable evidence to the existing literature on the
relationship between government spending and inflation dynamics in advanced economies. The
findings shed light on the short-term impact of fiscal policies on inflation, emphasizing the
importance of considering long-term effects and designing sustainable fiscal strategies to
maintain price stability in advanced economies.
Research Question 2
The Central Bank of Liberia (CBL) employs several monetary policy tools to manage inflation and stabilize
prices in the Liberian economy. Some of the key monetary policy tools commonly used by central banks,
including the CBL, include:





Open Market Operations (OMO): The CBL conducts open market operations by buying or selling
government securities in the open market. By doing so, the central bank can influence the
money supply, control liquidity in the banking system, and impact short-term interest rates.
Reserve Requirements: The CBL sets reserve requirements that commercial banks must maintain
as a percentage of their total deposits. By adjusting these requirements, the central bank can
influence the amount of funds banks have available for lending and, in turn, control the money
supply.
Interest Rate Policy: The CBL can use its policy interest rates, such as the key policy rate or the
discount rate, to influence borrowing and lending behavior. Raising interest rates can reduce
borrowing and spending, curbing inflationary pressures, while lowering rates can stimulate
economic activity.
Foreign Exchange Interventions: The CBL may engage in foreign exchange interventions to
influence the value of the Liberian dollar relative to foreign currencies. These interventions can
impact import prices and inflation, especially in an economy heavily dependent on imports.
Forward Guidance: Like other central banks, the CBL may use forward guidance to communicate
its future monetary policy intentions. This communication can influence market expectations
and guide economic behavior.
https://cbl.org.lr/media/press-releases/central-bank-liberia-adopt-new-monetary-policy
https://cbl.org.lr/media/press-releases/central-bank-liberia-adopt-new-monetary-policy
https://cbl.org.lr/media/press-releases/cbl-cuts-policy-rate-strengthen-liquidity-and-support-economicrecovery