INFLATION AND COST-BENEFIT ANALYSIS

Glenn Jenkins ()

No 1978-08, Development Discussion Papers from JDI Executive Programs

Abstract: One of the most frequent errors made in the preparation of investment project evaluations arises out of the improper accounting for the impact of inflation on the financial and economic performance of a potential project. In this case of commercial projects it is not uncommon to find the returns to the owner of the project (either private sector, government, or public enterprise) underestimated or overestimated by 50 percent or more simply as a result of the use of incorrect procedures in accounting for expected inflation. Similarly, in economic appraisals of projects, economists usually have ignored the financing and liquidity constraints which inflation imposes on the investment and operation of projects even when the realized rate of inflation is equal to the rate anticipated.

Keywords: Cost-Benefit Analysis; Inflation (search for similar items in EconPapers)
JEL-codes: H43 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1978-09
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:qed:dpaper:333

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