RELATIONSHIP BETWEEN INFLATION AND BUDGET DEFICIT IN MYANMAR (1986 – 2016)

Many scholars believe that budget deficit is the main cause of inflation. This paper attempts to investigate the relationship between inflation and budget deficit in Myanmar from 1986 to 2016.This study applied time series data from CSO and World Bank. In the empirical analysis, ADF unit-root test, co-integration test and Granger-causality test are applied. According to the co-integration test, there was long run negative co-integration between inflation and budget deficit in Myanmar. The Granger Causality test’s results show that budget deficit causes inflation in Myanmar.