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Inflation and seigniorage in Argentina

Author

Listed:
  • Kiguel, Miguel A.
  • Neumeyer, Pablo Andres

Abstract

Argentina, where increases in inflation appear to be closely linked to government attempts to raise seigniorage, was chosen for this study because of its persistent high rates of inflation and its fiscal imbalance. Monetization of fiscal deficits becomes a major force for creating money and inflation in countries with limited access to domestic and foreign credit. The authors found that inflation in Argentina played an important role in generating public sector revenues. The authors found that at the revenue maximizing rate of inflation, the government can get seigniorage of about 7.5 % of GDP in steady state. Between June 1978 and April 1985, there was a clear, positive relation between inflation and the inflation tax for rates of inflation below 18 %. At the 20 % range, the inflation tax ranged from 7 to 10 % of GDP. Increases in inflation above 20 % do not give the government more inflation tax revenues. The direct implication of this situation is that any serious stabilization effort requires finding an alternative source of revenue to replace the inflation tax.

Suggested Citation

  • Kiguel, Miguel A. & Neumeyer, Pablo Andres, 1989. "Inflation and seigniorage in Argentina," Policy Research Working Paper Series 289, The World Bank.
  • Handle: RePEc:wbk:wbrwps:289
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    References listed on IDEAS

    as
    1. Kiguel, Miguel A, 1989. "Budget Deficits, Stability, and the Monetary Dynamics of Hyperinflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 148-157, May.
    2. P. C. B. Phillips & S. N. Durlauf, 1986. "Multiple Time Series Regression with Integrated Processes," Review of Economic Studies, Oxford University Press, vol. 53(4), pages 473-495.
    3. Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 297-332.
    4. Stock, James H, 1988. "A Reexamination of Friedman's Consumption Puzzle," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(4), pages 401-407, October.
    5. Durbin, J, 1970. "Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors are Lagged Dependent Variables," Econometrica, Econometric Society, vol. 38(3), pages 410-421, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Argentine Inflation Saga Approaches Critical Moment
      by noreply@blogger.com (Carola Binder) in Quantitative Ease on 2013-11-05 04:07:00

    Citations

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    Cited by:

    1. Hernando Zuleta G., 1995. "Impuesto Inflacionario Y Señoreaje," BORRADORES DE ECONOMIA 002819, BANCO DE LA REPÚBLICA.
    2. Adenutsi, Deodat E., 2007. "The policy dilemma of economic openness and seigniorage-maximizing inflation in dollarised developing countries: The Ghanaian experience," MPRA Paper 37134, University Library of Munich, Germany.
    3. Baffes, John & Shah, Anwar, 1990. "Taxing choices in deficit reduction," Policy Research Working Paper Series 556, The World Bank.
    4. Manuel Bernal Garzón, 2015. "Evolución del señoreaje en un periodo de profundas transformaciones económicas," Revista Equidad y Desarrollo, Universidad de la Salle, May.
    5. Chamley, Christophe & Honohan, Patrick, 1990. "Taxation of financial intermediation : measurement principles and application to five African countries," Policy Research Working Paper Series 421, The World Bank.
    6. RUGE-MURCIA, Francisco J., 1997. "Heterodox Inflation Stabilization in Argentina, Brazil, and Israel. A Historical Review and Some Stylized Facts," Cahiers de recherche 9707, Universite de Montreal, Departement de sciences economiques.

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