Inflación dual y gasto público productivo:una perspectiva teórica

Abstract

Dual inflation occurs when prices raises in non-tradable goods are higher than those tradable goods. In general, economic literature gives two explanations tor dual inflation: Differences in productivity between the two sectors -tradable an non tradable- and tbe growth of public spending that expands non-tradable goods demando In this paper, we develop a simple model of public spendig where fiscal policy has a positive externality on the production of both sectors. The main results suggested by the paper are the following: i) that an increase in non-productive public spending (public expenditure) does not generate dual inflation and ii) that an increase of productive public spending can change the relative prices between the two sectors. In the latter case, dual inflation only takes place when the productivity rise in the tradable sector -due to an expansion of public spending- is higher than the rise in the non-tradable sector.