Fiscal Revenue and Inflationary Finance

Nurun Choudhry

No 1990/048, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes the erosion of fiscal revenue by inflation resulting from the issuance of money. The empirical evidence for a number of developing countries supports the well-known hypothesis that an increase in inflation will result in a fall in real fiscal revenue because of collection lags, thereby possibly widening the fiscal deficit. As such, attempts to generate resources to finance government expenditures via the inflation tax will involve a loss in other revenues, making this form of taxation even less desirable.

Keywords: WP; rate of inflation; revenue; inflation revenue; revenue-maximizing inflation rate; lag coefficient; welfare cost ratio; fiscal revenue; Inflation; Government debt management; Personal income; Monetary base; Middle East; Western Hemisphere; Africa; Asia and Pacific (search for similar items in EconPapers)
Pages: 32
Date: 1990-05-01
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Citations: View citations in EconPapers (1)

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