Collection lags, fiscal revenue and inflationary financing

empirical evidence and analysis by International Monetary Fund.

Publisher: International Monetary Fund, Research Department in [s.l.]

Written in English
Published: Pages: 17 Downloads: 785
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Edition Notes

Statementprepared by Nurun N. Choudhry.
SeriesIMF working paper -- WP/91/41
ContributionsChoudhry, Nurun N., International Monetary Fund. Research Dept.
The Physical Object
Pagination17 p. --
Number of Pages17
ID Numbers
Open LibraryOL18314604M

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Collection lags, fiscal revenue and inflationary financing by International Monetary Fund. Download PDF EPUB FB2

The paper provides empirical evidence on collection lags in major categories of government revenue and analyzes the estimated revenue-eroding effects of inflation within the standard model of inflationary finance.

The evidence indicates a wide variation in collection lags among the categories of revenues. The estimated erosion of real fiscal revenue, although varied in the sample countries. Get this from a library. Collection Lags, Fiscal Revenue and Inflationary Financing: Empirical Evidence and Analysis.

[Nurun N Choudhry] -- The paper provides empirical evidence on collection lags in major categories of government revenue and analyzes the estimated revenue-eroding effects of inflation within the standard model of. 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.

Collection Lags, Fiscal Revenue and Inflationary Financing; Empirical Evidence and Analysis. Nurun N. Choudhry. No /, IMF Working Papers from International Monetary Fund Abstract: The paper provides empirical evidence on collection lags in major categories of government revenue and analyzes the estimated revenue-eroding effects of inflation within the standard model of inflationary by: 6.

This paper analyzes the erosion of fiscal revenue by inflation resulting from fiscal revenue and inflationary financing book 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 Cited by: 5. This paper analyzes the optimal rate of monetary expansion when government resorts to inflationary finance to generate additional investment for enhancing growth.

If there are lags in tax collection, an increase in inflation erodes real fiscal revenue, thereby worsening the current balance while reducing government investment. This impedes capital accumulation as well as increases the. A government that chooses the option of inflationary finance to generate additional investment must take into account the possible effect of real fiscal revenue erosion on the budget deficit.

In general, the use of inflationary finance can threaten the objectives of growth with efficiency and price stability. When there are collection lags in the tax system, inflation reduces the real revenues.

This is often offered as an argument for less reliance on the inflation tax. But the optimal rates of other taxes should also be reconsidered in the light of collection lags. When this is done, the focus shifts from the revenues (which can be recouped by changing the rates of these taxes), to the associated.

Downloadable (with restrictions). When there are collection lags in the tax system, inflation reduces real revenues. This is often offered as an argument for less reliance on the inflation tax. But the optimal rates of other taxes should also be Collection lags in the light of collection lags.

When this is done, the focus shifts from the revenues (which can be recouped by changing the rates of. The literature on inflationary finance has dealt only with the case in which inflation leaves the real revenue from the tax system unaffected. However, in most cases, inflation br.

Annotation. 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.

Revenue from Inflationary Finance. As indicated above, the revenue from inflationary finance is equivalent to the product of the inflation rate π t and the real cash balances (M/P).Given the real balances, an increase in π t generated by the money created to finance a deficit would be accompanied by higher inflationary finance revenue.

And, alternatively, given the inflationary. using inflationary finance and commodity taxation when there are collection lags (Dixit, ), in which - challenging Tanzi’s () argument that inflationary finance may further weaken the public finances in the case that both high inflation and collection lags erode the real value of fiscal revenue.

In the case of Turkey inwe find that government appropriated significant revenue due to bracket-creep, in addition to the revenue from inflationary finance. INTRODUCTION One of the important consequences of inflationary finance is the phenomenon of bracket-creep which occurs under unindexed progressive tax regimes.

Fiscal Deficit and Inflation: An empirical analysis for India. inflation cause to decrease in tax revenue in crisis time and low level of. Inflation, lags in collection and the real value. When tax payments take place with a considerable time lag, inflation erodes part of their real value, and this loss may be comparable or even surpass the well-known gains from seigniorage.

The paper finds that for the economy of Greece, a reduction of inflation will actually raise the total sum of tax collection and seigniorage, thus easing and not aggravating the debt-accumulation process. Average time lags (in quarters) Brazil Colombia Dominican Republic Thailand Money demand: (1 - X)/X y)/y Government expenditure: (1 - Government revenue: (1 - T) / T Expected inflation: (1 - 3)/3 The average lags in the revision of expectations of inflation are.

Also, anticipated revenue from oil estimated at N trillion and the Non-oil revenue estimated at N trillion will be added up for the budget financing. However, from the fiscal assumptions in place, the total federally shareable income is. At this rate, the overall economy will shrink by around 8 to 10% overall for this fiscal year.

This would translate into a loss of national income of about Rs 16 to 20 lakh crore, or between Rs. Downloadable (with restrictions). The literature dealing with the impact of inflation on tax revenue has assumed that two conditions hold, namely, that (1) taxes are paid as they accrue, and that (2) tax systems are generally elastic.

When these two assumptions are valid, inflation is likely to lead to increases in real tax revenue. On the other hand, when the assumptions do not hold--that is. In Argentina, Brazil and Chile, procuring an additional 1 % of GNP through inflation, requires in the long run, inflationary taxation of approximately %, % and % of GNP, respectively.

Before deciding to finance a fiscal deficit with inflation tax, officials should consider the interaction between regular tax collection and inflation tax. In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure (spending) to influence a country's economy.

The use of government revenues and expenditures to influence macroeconomic variables developed as a result of the Great Depression, when the previous laissez-faire approach to economic management became unpopular. This implies a maximum `gross' inflation tax revenue (i.e.

before subtracting losses through the fiscal-lag effect) of % of GDP, at an inflation rate near 25% pr month. Moreover, we shall assume a `tax capacity' (ho+hl) of 20% of GDP, with ht=, that is, a little more than half of the tax base is subject to a one-month collection lag.

Home» Business» Income tax revenue lags behind FG but expect it to achieve a revenue collection of about 77 per cent amounting to N trillion for the full year.” ON pages 10 and. out of 5 stars Very good book on the nature of inflation, lacks confirmatory data and practical advice.

Reviewed in the United States on February 8, This book aims to give the reader a deeper appreciation of what inflation is and dispel the most prevalent myths about s: 7. The CPI based inflation stood at percent so far while it was percent in the same period of last fiscal year.

Exports came down by percent and imports reduced by 4 percent. The non. A collection lag of two months, which was normal for the payment of sales taxes such as the value-added tax, combined with a monthly rate of inflation of 10%, would lead to a reduction in real tax revenue of about 20%.

A monthly inflation rate of 20% would lead to a fall in real tax revenue. Inflationary Finance and Growth. Bijan B. Aghevli; Nurun N.

Choudhry, Fiscal Revenue, Inflationary Finance and Growth, IMF Working Pap Avinash K. Dixit, The Optimal Mix of Inflationary Finance and Commodity Taxation with Collection Lags, IMF Working Papers Inflation, Lags in Collection, and the Real Value of Tax Revenue.

L'inflation, les retards de recouvrement et la valeur réelle des recettes fiscales. Inflación, desfases en la recaudación y valor real de los ingresos tributarios. Vito Tanzi Staff Papers vol pages – ()Cite this article. Inflation, Lags in Collection, and the Real Value of Tax Revenue (L'inflation, les retards de recouvrement et la valeur réelle des recettes fiscales) (Inflación, desfases en la.

Governments may finance their budget deficits through aid, debt or borrowing from domestic and external sources. One of the reliable sources of government financing is the creation of base money.Consumers respond differently to conventional taxes, unconventional taxes (through inflation or interest and credit controls), and debt financing, in ways that make fiscal adjustment the most.A strong national economy would flourish the living conditions of the citizens and create an environment where opportunities to produce and thrive are abundant.

Unit 7: Macroeconomics: Fiscal Policy Duration: 1 Week October November 2 Unit Test: November 2 GSE Standards: SSEMA3 SSEPF3 Notes: Austerity. As a result of that move, and many others, the size of the Fedâ s balance sheet.