Fiscal Policy, Prices, Inflation - Dependencies and Interdependences

Abstract

The phenomenon called inflation is a complex problem of macroeconomic analysis and is one of the most important forms of the economic and social imbalance. Inflation is the persistent and significant growth process of the price level. Also, inflation can be defined by a decrease in purchasing power of a monetary unit, respectively of the quantity of goods and services that can be purchased with the help of a monetary unit. Thus, inflation leads to the distortion of the ratio between the nominal and the real value, with the effect of reducing the purchasing power of money. Through taxation, the State can gain from inflation in its capacity as the tax collector. In the case of indirect taxes, which are found in the sales prices of products and services, any increase in them directly affects their level. The intent of this article is to highlight the dependencies and interdependencies that may exist between fiscal policy, prices and inflation. Period under study extends over six years, from 2013 to 2018. The processed data are for Romania and have been extracted from the National Bank of Romania and National Institute of Statistics reports.