ABSTRACT
Large government deficits experienced in recent years in various countries, mainly developing economies, and evidence of a positive relation between government deficits and the growth of money and prices are at the heart of the debate on fiscal policy.2 The situation is rather similar to that experienced by many European countries just at the beginning of their industrialization process. Many countries lacked a single central bank and had a plurality of small banks of issue, the government was frequently pressed by new tasks and by the need to face large infrastructure expenditures, and it lacked an efficient fiscal administration to raise the required taxes.
