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

Author

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  • Ngouhouo, Ibrahim
  • Tchoffo, Rodrigue

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.

Suggested Citation

  • Ngouhouo, Ibrahim & Tchoffo, Rodrigue, 2019. "Real level of public investment: how to manage the inflation?," MPRA Paper 95914, University Library of Munich, Germany, revised 15 Sep 2019.
    • Handle: RePEc:pra:mprapa:95914
    as

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    File URL: https://mpra.ub.uni-muenchen.de/95914/4/MPRA_paper_95914.pdf
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    References listed on IDEAS

    as
    1. Vito Tanzi & Howell H. Zee, 1997. "Fiscal Policy and Long-Run Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 179-209, June.
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    3. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
    4. Manuel Alejandro Cardenete & Ana-Isabel Guerra & Ferran Sancho, 2017. "Applied General Equilibrium," Springer Texts in Business and Economics, Springer, edition 2, number 978-3-662-54893-6, June.
    5. Tuan T. Chu & Jens Hölscher & Dermot McCarthy, 2020. "The impact of productive and non-productive government expenditure on economic growth: an empirical analysis in high-income versus low- to middle-income economies," Empirical Economics, Springer, vol. 58(5), pages 2403-2430, May.
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    More about this item

    Keywords

    Government spending; inflation; taxes; investment; computable general equilibrium;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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