Fiscal Revenue and Inflationary Finance

Author/Editor:

Nurun N. Choudhry

Publication Date:

May 1, 1990

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 1990/048

Subject:

Expenditure Government debt management Inflation Monetary base Money National accounts Personal income Prices Public financial management (PFM)

English

Publication Date:

May 1, 1990

ISBN/ISSN:

9781451972184/1018-5941

Stock No:

WPIEA0481990

Pages:

32

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