I would say; it is not really a default, but a money financing budget deficit.
I theory there is an inflationary impact due to money financing. Institutionally,
however it is a very important aspect regarding Central Bank independence,
since it has became more or less clear that inflationary path in a economy
depends, crucially, of Central Bank independence. In countries in transition,
say form est Europe or many developing countries it is veru usual tah government
do not playback debt to Central Banks. In fact there are do debts to Central
Bank in a way we register in financial markets. Usually governments
sells bonds to central banks, afterwards Central Banks officials clean
its balance easily devaluating currency for example, at its happens in
this country Venezuela. There are many other ways to deal with it, but
at the end of the day, it becomes just money dropping over the economy.
Alexander Guerrero
PhD (London)
UCV, Caracas
Ismail Alimanik wrote:
Hi everyone!
Has anyone come across a paper available on the net dealing with debt
default by a government
to their own central bank. I think I should be more specific. If a
government owes a central bank 80 million dollars and if it defaults on
its debt, could the government get away without doing much harm to the
economy?
-Ismail
Ismail Ali Manik
Ministry of Finance
Maldives
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