IDEAS home Printed from https://ideas.repec.org/a/bla/jcmkts/v42y2004i4p795-813.html
   My bibliography  Save this article

Profiting from the Euro? Seigniorage Gains from Euro Area Accession

Author

Listed:
  • Daniel Gros

Abstract

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.

Suggested Citation

  • Daniel Gros, 2004. "Profiting from the Euro? Seigniorage Gains from Euro Area Accession," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 795-813, November.
  • Handle: RePEc:bla:jcmkts:v:42:y:2004:i:4:p:795-813
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.0021-9886.2004.00530.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    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. Jacek Cukrowski & Emil Stavrev, 2001. "Central bank seigniorage in the Czech Republic," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 243-247.
    3. Klein,Martin & Neumann,Manfred, "undated". "Seignorage: What is it and who gets it?," Discussion Paper Serie B 124, University of Bonn, Germany.
    4. 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 - Economics Institute, Prague.
    5. 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.
    6. Drazen, Allan, 1985. "A general measure of inflation tax revenues," Economics Letters, Elsevier, vol. 17(4), pages 327-330.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rokas Bancevičius, 2011. "New EU member states and the Euro: economic readiness, benefits and costs," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(4), pages 461-480, November.
    2. Martin Cincibuch & Tomáš Holub & Jaromír Hurník, 2009. "Central Bank Losses and Economic Convergence," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(3), pages 190-215, August.
    3. Belke, Ansgar & Gros, Daniel, 2016. "Negative Rates and Seigniorage: Turning the central bank business model upside down? The special case of the ECB," CEPS Papers 11753, Centre for European Policy Studies.
    4. repec:eee:jmacro:v:56:y:2018:i:c:p:218-230 is not listed on IDEAS
    5. repec:diw:diwfin:diwfin05030 is not listed on IDEAS
    6. Georgy Ganev, 2009. "Costs and Benefits of Euro Adoption in Bulgaria," Working Paper / FINESS 5.3, DIW Berlin, German Institute for Economic Research.
    7. Patrick A. Imam, 2009. "Introducing the Euro as Legal Tender—Benefits and Costs of Eurorization for Cape Verde," IMF Working Papers 09/146, International Monetary Fund.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jcmkts:v:42:y:2004:i:4:p:795-813. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-9886 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.