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Giving Up the Swiss Franc:Some Considerations on Seigniorage Flows under EMU

  • Andreas M. Fischer
  • Thomas J. Jordan
  • Caesar P. Lack

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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Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 138 (2002)
Issue (Month): I (March)
Pages: 61-82

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Handle: RePEc:ses:arsjes:2002-i-4
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  1. Baltensperger, Ernst & Jordan, Thomas J, 1998. "Seigniorage and the Transfer of Central Bank Profits to the Government," Kyklos, Wiley Blackwell, vol. 51(1), pages 73-88.
  2. 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.
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  5. Roberto Chang, 2000. "Dollarization: a scorecard," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 1-12.
  6. 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.
  7. Pablo Emilio Guidotti & Carlos A. Rodriguez, 1991. "Dollarization in Latin America; Gresham's Law in Reverse?," IMF Working Papers 91/117, International Monetary Fund.
  8. 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.
  9. Seitz, Franz, 1995. "The circulation of Deutsche Mark abroad," Discussion Paper Series 1: Economic Studies 1995,01e, Deutsche Bundesbank, Research Centre.
  10. Sinn, Hans-Werner & Feist, Holger, 1997. "Eurowinners and Eurolosers: The distribution of seigniorage wealth in EMU," Munich Reprints in Economics 19567, University of Munich, Department of Economics.
  11. 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.
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