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.
Creation-Date: November 1989 (revised)
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