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How to Cut the Seigniorage Cake into Fair Shares in an Enlarged EMU

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  • JØRGEN DRUD HANSEN
  • ROSWITHA M. KING

Abstract

The European Central Bank redistributes each year seigniorage from issuing euro notes to the National Central Banks of the euro countries. The key for this redistribution is, from 2008, based on the respective GDP and population proportions of the euro countries. Applying the distribution formula to the new EU countries from central and eastern Europe seems to give these countries a large net benefit compared with the seigniorage they bring in, i.e. their share of currency in circulation. However, as argued in this article, currency demand in the new EU member countries is expected to increase relative to the present group of euro countries – especially after gaining membership in the EMU because of integration of the financial markets and, in the longer term, catching‐up growth. Hence, it is doubtful whether a large unintended redistribution of seigniorage to the benefit of acceding EMU countries will materialize in the future.

Suggested Citation

  • Jørgen Drud Hansen & Roswitha M. King, 2007. "How to Cut the Seigniorage Cake into Fair Shares in an Enlarged EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 45(5), pages 999-1010, December.
    • Handle: RePEc:bla:jcmkts:v:45:y:2007:i:5:p:999-1010
    DOI: 10.1111/j.1468-5965.2007.00757.x
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    Cited by:

    1. Jørgen Hansen & Roswitha King & Virmantas Kvedaras, 2011. "The International Reserves Issue in the EMU," Open Economies Review, Springer, vol. 22(1), pages 143-161, February.

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