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Seigniorage and Inflation: The Case of Argentina

  • Kiguel, Miguel A
  • Neumeyer, Pablo Andres

This paper studies the relation between seigniorage and inflation in Argentina for the period 1979-1989. We estimate a money demand function and derive the Laffer curve for several sub-periods with different monetary/exchange rate regimes. We find that for most of the period the Argentine economy remained on the 'efficient' side of the Laffer curve. The long-run revenue maximizing rate of inflation has been around 20 percent per month for the 'tablita' (1979-1981) and post-Austral (1985-1988) periods and around 30 percent per month for the pre-Austral period (1982-1985). The long-run maximum level of seigniorage has been above 6 percent of GDP. Our results imply that the hyperinflation experienced by Argentina in 1989 can be interpreted as an unstable phenomenon that resulted from the need to collect a level of seigniorage that exceeded the maximum warranted by the demand for money. Copyright 1995 by Ohio State University Press.

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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 27 (1995)
Issue (Month): 3 (August)
Pages: 672-82

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Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:3:p:672-82
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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