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Corruption and Seigniorage

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  • Amrita Dillon
  • GARETH D. MYLES
  • HANA YOUSEFI

Abstract

There is convincing empirical evidence in cross-section data of a positive correlation between the level of corruption and the rate of inflation. This paper explores whether this correlation can be a consequence of a government exploiting seigniorage to compensate for revenue lost to corruption. We embed corruption within an overlapping generations economy that has money as the only store of value and in which the government optimizes the rate of monetary growth. Three different forms of corruption are modeled, and it is shown that all three can be positively correlated with increased inflation.

Suggested Citation

  • Amrita Dillon & GARETH D. MYLES & HANA YOUSEFI, 2015. "Corruption and Seigniorage," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(4), pages 480-503, August.
    • Handle: RePEc:bla:jpbect:v:17:y:2015:i:4:p:480-503
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    References listed on IDEAS

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    Cited by:

    1. Ghosh Sugata & Neanidis Kyriakos C., 2017. "Corruption, fiscal policy, and growth: a unified approach," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(2), pages 1-24, June.
    2. Gareth D. Myles & Hana Yousefi, 2020. "Corruption as an Occupational Choice: Endogenous Corruption and Tax Policy," Southern Economic Journal, John Wiley & Sons, vol. 86(4), pages 1446-1474, April.
    3. Réda Marakbi & Patrick Villieu, 2020. "Corruption, tax evasion, and seigniorage in a monetary endogenous growth model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 2019-2050, December.

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