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Profiting from the Euro? Seigniorage Gains from Euro Area Accession


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  • Daniel Gros


This article puts forward a methodology to assess the fiscal implications for the new EU members from central and eastern Europe (CEECs) of joining the euro area. An application of this methodology under a specific set of conditions shows that the rules of the ECB on the distribution of seigniorage favour poorer countries so that one would expect the new member countries to benefit from participating in the distribution of the profits of the ECB. For two countries the gains could indeed be sizeable, initially almost 1 per cent of GDP, per annum. But for others the gains are more modest. Two factors have tended to reduce the expected financial gains for the new Member States: firstly, since the introduction of the euro, cash use has fallen considerably in the euro area; and secondly, some of the new CEEC members have in general much higher cash-to-GDP ratios and therefore earn, for the time being, relatively high domestic seigniorage revenues. Illustrative calculations show that, in present value terms, the gains could reach up to 10 per cent of GDP for poorer countries that catch up only slowly to the EU average. But countries that enter with a GDP per capita above about one-half of the EU average might actually lose if initially their cash ratios are much above the euro area value. Copyright Blackwell Publishing Ltd 2004.

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Article provided by Wiley Blackwell in its journal Journal of Common Market Studies.

Volume (Year): 42 (2004)
Issue (Month): 4 (November)
Pages: 795-813

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Handle: RePEc:bla:jcmkts:v:42:y:2004:i:4:p:795-813

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  1. Sinn, Hans-Werner & Feist, Holger, 1997. "Eurowinners and Eurolosers: The distribution of seigniorage wealth in EMU1," European Journal of Political Economy, Elsevier, vol. 13(4), pages 665-689, December.
  2. Klein,Martin & Neumann,Manfred, . "Seignorage: What is it and who gets it?," Discussion Paper Serie B 124, University of Bonn, Germany.
  3. Jacek Cukrowski & Emil Stavrev, 2001. "Central bank seigniorage in the Czech Republic," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 243-247.
  4. Feist, Holger & Sinn, Hans-Werner, 1997. "Eurowinners and Eurolosers: The Distribution of Seigniorage Wealth in EMU," CEPR Discussion Papers 1747, C.E.P.R. Discussion Papers.
  5. Jacek Cukrowski & Emil Stavrev, 1999. "Central Bank Seigniorage: Czech Republic 1993-1997," CERGE-EI Working Papers wp142, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  6. Drazen, Allan, 1985. "A general measure of inflation tax revenues," Economics Letters, Elsevier, vol. 17(4), pages 327-330.
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Cited by:
  1. Rokas Bancevičius, 2011. "New EU member states and the Euro: economic readiness, benefits and costs," Empirica, Springer, vol. 38(4), pages 461-480, November.
  2. Patrick A. Imam, 2009. "Introducing the Euro As Legal Tender," IMF Working Papers 09/146, International Monetary Fund.
  3. Martin Cincibuch & Tomas Holub & Jaromir Hurnik, 2008. "Central Bank Losses and Economic Convergence," Working Papers 2008/3, Czech National Bank, Research Department.
  4. Georgy Ganev, 2009. "Costs and Benefits of Euro Adoption in Bulgaria," Working Paper / FINESS 5.3, DIW Berlin, German Institute for Economic Research.
  5. repec:diw:diwfin:diwfin05030 is not listed on IDEAS


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