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Giving Up the Swiss Franc: Some Consideration on Seigniorage Flows Under EMU

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Author Info
Fischer, Andreas M
Jordan, Thomas J.
Lack, Caeser P

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Abstract

The monetary debate in Switzerland about joining the European Monetary Union (EMU) has primarily focused on the gains in terms of transaction costs and lower uncertainty from using a common currency versus the sacrifice of giving up an independent monetary policy. This Paper considers an additional factor in this debate, namely the decrease of seigniorage for Switzerland in the case of joining EMU. Our calculations reveal that this loss of revenues is not trivial. Swiss currency holdings per capita are among the largest in the world. They are estimated to be 5'000 Swiss francs per capita in 2002. If Switzerland joined EMU at that time, about half of the seigniorage stemming from the previous Swiss franc currency circulation would be redistributed among the EMU member countries in the worst case. Our results indicate that Switzerland would be the third largest contributor of seigniorage in absolute terms after Germany and Spain. In relative terms, the Swiss per capita contribution would be more than four times as high as the German contribution.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3156.

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Date of creation: Jan 2002
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Handle: RePEc:cpr:ceprdp:3156

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Related research
Keywords: seigniorage; swiss national bank; the euro;

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Find related papers by JEL classification:
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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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. [Downloadable!] (restricted)
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  2. Richard D. Porter & Ruth A. Judson, 1996. "The location of U.S. currency: how much is abroad?," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 883-903.
  3. Dooley, Michael, 1998. "Speculative Attacks on a Monetary Union?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(1), pages 21-26, January. [Downloadable!] (restricted)
  4. Roberto Chang, 2000. "Dollarization: a scorecard," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 1-12. [Downloadable!]
  5. Pablo Guidotti & Carlos A. Rodríguez, 1992. "Dollarization in Latin America: Gresham's Law in Reverse?," CEMA Working Papers: Serie Documentos de Trabajo. 81, Universidad del CEMA. [Downloadable!]
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  6. Casella, Alessandra, 1992. "Participation in a Currency Union," American Economic Review, American Economic Association, vol. 82(4), pages 847-63, September. [Downloadable!] (restricted)
    Other versions:
  7. Baltensperger, Ernst & Jordan, Thomas J, 1998. "Seigniorage and the Transfer of Central Bank Profits to the Government," Kyklos, Blackwell Publishing, vol. 51(1), pages 73-88.
  8. Ernst Baltensperger & Thomas J. Jordan, 1997. "Principles of Seigniorage," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 133(II), pages 133-152, June. [Downloadable!]
  9. Kenneth Rogoff, 1998. "Blessing or curse? Foreign and underground demand for euro notes," Economic Policy, CEPR, CES, MSH, vol. 13(26), pages 261-303, 04. [Downloadable!] (restricted)
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