Real level of public investment: how to manage the inflation?

Ngouhouo, Ibrahim and Tchoffo, Rodrigue (2019): Real level of public investment: how to manage the inflation?

Abstract

When the government collects a supplementary indirect tax on an output, the price of that output increases by consequence. Then, using the resulting revenue for public investments will lead to an underconsumption of the total revenue invested. This is due to an inflation that has been created by this mechanism. This paper investigates the determination of the net amount of investment projects taking into account the effect of inflation. We use the computable general equilibrium model to test our hypothesis. As result, we show that, some simulations are needed in order to reach the equilibrium.

• Item Type: MPRA Paper
• Language: English
• Keywords: Government spending; inflation; taxes; investment; computable general equilibrium
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General

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