ABSTRACT
Ernst-Albrecht Conrad In the recent literature on the impact of inflation on government finance it has been argued that the time span that is needed to collect taxes tends to reduce, if not reverse, any gain in real revenue that a government could obtain from inflationary finance. Following initial work by Olivera, this effect has been studied more fully by Tanzi.2 This discussion has focused on the revenue side of the budget. What matters in the budgetary context, however, is the real value of goods and services that the government can buy with the revenue collected. This chapter focuses on the question of whether the time needed in the expenditure process and in treasury operations also should be considered in assessing the effect of inflation on government finance and whether these lags tend to strengthen or lessen the Tanzi effect on the tax side.
