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Seigniorage Revenue or Consumer Revenue? Theoretical and Empirical Evidences

  • Tatsuyoshi Miyakoshi

    ()

    (Osaka School of International Public Policy, Osaka University)

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    The purpose of this paper is to propose a seigniorage model including the contributions of Bailey (1956) and Marty (1976), using a different framework to Mankiw (1987), to test whether their results are supported, and use a numerical example to estimate the seigniorage model. The government decides the money growth rate to maximize the social welfare function for each of seigniorage revenue aversion, loving and neutrality. The numerical example using Japanese data shows that the social welfare function supports seigniorage revenue aversion, supporting the results of Bailey and Marty, and that the degree of seigniorage revenue aversion is stronger in the 2000s than in the 1990s.

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0811.pdf
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    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-11.

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    Length: 23 pages
    Date of creation: Mar 2008
    Date of revision:
    Handle: RePEc:osk:wpaper:0811
    Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/
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    1. Amano, Robert A., 1998. "On the Optimal Seigniorage Hypothesis," Journal of Macroeconomics, Elsevier, vol. 20(2), pages 295-308, April.
    2. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Loviscek, Anthony L., 1996. "Seigniorage and the Mexican financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(1), pages 55-64.
    5. T. -W. Ho, 2003. "Regime-switching properties of the optimal seigniorage hypothesis: the case of Taiwan," Applied Economics, Taylor & Francis Journals, vol. 35(4), pages 485-494.
    6. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
    7. N. Gregory Mankiw, 1987. "The Optimal Collection of Seigniorage: Theory and Evidence," NBER Working Papers 2270, National Bureau of Economic Research, Inc.
    8. Ayca Tekin-Koru & Erdal Ozmen, 2003. "Budget deficits, money growth and inflation: the Turkish evidence," Applied Economics, Taylor & Francis Journals, vol. 35(5), pages 591-596.
    9. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
    10. Phylaktis, Kate & Taylor, Mark P, 1993. "Money Demand, the Cagan Model and the Inflation Tax: Some Latin American Evidence," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 32-37, February.
    11. Marty, Alvin L., 1976. "A note on the welfare cost of money creation," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 121-124, January.
    12. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
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