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The Political Economy of Seigniorage

Author/Editor: Aisen, Ari | Veiga, Francisco José | International Monetary Fund. Monetary and Financial Systems Dept.
Authorized for Distribution: September 1, 2005
Electronic Access: Free Full Text (PDF file size is 579KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: While most economists agree that seigniorage is one way governments finance deficits, there is less agreement about the political, institutional, and economic reasons for relying on it. This paper investigates the main determinants of seigniorage using panel data on about 100 countries, for the period 1960-1999. Estimates show that greater political instability leads to higher seigniorage, especially in developing, less democratic, and socially polarized countries, with high inflation, low access to domestic and external debt financing and with higher turnover of central bank presidents. One important policy implication of this study is the need to develop institutions conducive to greater economic freedom as a means to lower the reliance on seigniorage financing of public deficits.
 
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Series: Working Paper No. 05/175
Subject(s): Political economy | Currency issuance | Money supply | Economic models
Author's keyword(s): Seigniorage | political instability | institutions
 
English  
    Published:   September 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005175   Pages:   26
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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