Cover IMF Working Papers
Buy Book in Print
Fiscal Revenue, Inflationary Finance and Growth
Author:
Mr. Nurun N. Choudhry
Search for other papers by Mr. Nurun N. Choudhry in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 1992: Issue 023
Language:
English
Publication Date:
01 Mar 1992
DOI:
https://doi.org/10.5089/9781451921069.001
ISBN:
9781451921069
ISSN:
1018-5941
Pages:
30
Keywords:
WP; shadow price; inflation rate; capital formation; inflation revenue; welfare cost of inflation; shadow price of capital; revenue-eroding effect; inflation expectation; effects of inflation; revenue ratio; Monetary expansion; Inflation; Consumption; Government debt management; Capital productivity
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (1.5 MB) Download Epub
This paper analyzes the optimal rate of monetary expansion when government resorts to inflationary finance to generate additional investment for enhancing growth. If there are lags in tax collection, an increase in inflation erodes real fiscal revenue, thereby worsening the current balance while reducing government investment. This impedes capital accumulation as well as increases the welfare cost of inflation. As such, the optimal rate of monetary expansion, equilibrium capital-labor ratio and output are lower while the marginal cost of inflationary finance is higher than they would be without collection lags. Simulations are performed to highlight empirical implications.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund