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Inflation And Cost-Benefit Analysis


  • Glenn Jenkins

    () (Queen's University, Kingston, On, Canada)


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.

Suggested Citation

  • Glenn Jenkins, 1978. "Inflation And Cost-Benefit Analysis," Development Discussion Papers 1978-08, JDI Executive Programs.
  • Handle: RePEc:qed:dpaper:333

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    References listed on IDEAS

    1. Eberhard, Anton & Shkaratan, Maria, 2012. "Powering Africa: Meeting the financing and reform challenges," Energy Policy, Elsevier, vol. 42(C), pages 9-18.
    2. Gagnon, Luc & Belanger, Camille & Uchiyama, Yohji, 2002. "Life-cycle assessment of electricity generation options: The status of research in year 2001," Energy Policy, Elsevier, vol. 30(14), pages 1267-1278, November.
    3. Prasad Tallapragada V.S.N. & Maria Shkaratan & Ada Karina Izaguirre & Jaakko Helleranta & Saifur Rahman & Sten Bergman, 2009. "Monitoring Performance of Electric Utilities : Indicators and Benchmarking in Sub-Saharan Africa," World Bank Other Operational Studies 13030, The World Bank.
    4. Karekezi, Stephen & Kimani, John, 2002. "Status of power sector reform in Africa: impact on the poor," Energy Policy, Elsevier, vol. 30(11-12), pages 923-945, September.
    5. Steinbuks, J. & Foster, V., 2010. "When do firms generate? Evidence on in-house electricity supply in Africa," Energy Economics, Elsevier, vol. 32(3), pages 505-514, May.
    6. Anton Eberhard & Vivien Foster & Cecilia BriceƱo-Garmendia & Fatimata Ouedraogo & Daniel Camos & Maria Shkaratan, 2008. "Underpowered : The State of the Power Sector in Sub-Saharan Africa," World Bank Other Operational Studies 7833, The World Bank.
    7. Chun-Yan Kuo & Glenn P. Jenkins & M. Benjamin Mphahlele, 2003. "The Economic Opportunity Cost Of Capital In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 71(3), pages 523-543, September.
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    Cited by:

    1. Glenn Jenkins, 1981. "An International Comparative Analysis Of The Taxation Of The Steel Industry," Development Discussion Papers 1981-07, JDI Executive Programs.

    More about this item


    Cost-Benefit Analysis; Inflation;

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate


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