The Political Economy of Seigniorage

Author/Editor:

Ari Aisen ; Francisco José Veiga

Publication Date:

September 1, 2005

Electronic Access:

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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.

Series:

Working Paper No. 05/175

Subject:

English

Publication Date:

September 1, 2005

ISBN/ISSN:

9781451861945/1018-5941

Stock No:

WPIEA2005175

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

26

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