The paper presents the findings of a research into inflationary processes under different types of fiscal/monetary policy mixes, based on the analysis of the link between inflation and general government budget position.

It comprises five parts: first, the author presents the theoretical background to the relationship between inflation and the budget deficit. Next, he goes on to identify the difficulties in determining the impact of fiscal policy upon inflation. Under sufficiently restrictive fiscal policy simple statistical analysis may disprove the proposition that fiscal expansion contributes to inflation (or may even show the contrary). This is due to numerous feedback connections between the two.

Therefore in the subsequent part of his work, the author quotes earlier research designed to confirm the inflationary influence of a budget deficit, this time employing more sophisticated, econometric tools. Further, he presents the findings of his own study, based on a sample of countries, which has failed to confirm a relationship between inflation and the budget position of any statistical materiality. However, the relationship has been proved positive, as predicted by the economic theory.

In the final part the author proposes several qualitative conclusions resulting from the analysis. These may be helpful in identifying the directions of future research.