Engineering economics on inflation

To review the engineering literature on inflation, 82 references, including texts in engineering economics and capital budgeting, where annotated and grouped. Of these, the dozen most recent texts in engineering economics were systematically compared according to their treatment of inflation and their terminology. The history of the terminology and the treatment of inflation in discounted cash flow analysis was traced. It was found that inflation had become a standard topic both in texts for engineers and for business managers. Wide variation was found in terminology, even though there was a consensus on the overall approach for explicitly incorporating inflation in project analysis. Only a few authors gave special recognition to the uncertainty of inflation as a separate risk factor. There was widespread agreement that cash flows and interest or discount rates should be handled consistently in an inflationary environment, and there was concern that this was not always carried out in practice.<
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