SFB 303 Discussion Paper No. B - 124
Author: Klein, Martin, and Manfred J.M. Neumann
Title: Seigniorage: What Is it and Who Gets it?
Abstract: The paper points out the distinction between the fiscal and the montary
aspect of seigniorage. From a fiscal point of view, seigniorage is the
government's revenue from the creation of money: from the point of view of
monetary theory it is the private sector's cost from holding money. The
accounts of the government and the central bank are then integrated in a
general accounting framework which can be used to explore the implications
of this distinction in a variety of institutional setups. The general result
that emerges is that the government's receipts of seigniorage depend
critically on the institutional and operational details of base money
creation. A central bank with a sufficient amount of operational
independence will be able to influence the amount of seigniorage accruing to
the government at given rates of money growth. The accounting framework is
applied to data from Germany. The analysis has implications for the current
practice of the EMS as well as the envisioned creation of the European
Central Bank.
Keywords:
JEL-Classification-Number:
Creation-Date: November 1989 (revised)
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