01-08-2010, 05:05 PM
Not necessary. GDP approach used for deficit financing is more conservative approach to control domestic inflation that would be caused by deficit financing.
NI would include income generated from resources external to country (e.g. remittances, profits from outside country etc.). Deficit financing based on income generated outside of country would cause inflationary pressures on goods and services produced inside of country, because deficit financing would be more than required level to be supported by goods/services available inside the country. Its like credit creation in Pakistan based on incomes of Pakistanis living outside of Pakistan. This would cause more inflation in country, because it is not backed-up by income generated WITHIN country.
So, using GDP is more restrictive and conservative approach in this case of deficit financing.
NI would include income generated from resources external to country (e.g. remittances, profits from outside country etc.). Deficit financing based on income generated outside of country would cause inflationary pressures on goods and services produced inside of country, because deficit financing would be more than required level to be supported by goods/services available inside the country. Its like credit creation in Pakistan based on incomes of Pakistanis living outside of Pakistan. This would cause more inflation in country, because it is not backed-up by income generated WITHIN country.
So, using GDP is more restrictive and conservative approach in this case of deficit financing.
