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

Ibrahim Ngouhouo and Rodrigue Tchoffo

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Government spending; inflation; taxes; investment; computable general equilibrium (search for similar items in EconPapers)
JEL-codes: C68 E62 H50 (search for similar items in EconPapers)
Date: 2019-09-15, Revised 2019-09-15
New Economics Papers: this item is included in nep-cmp and nep-mac
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