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Copyright of Journal of Economic Policy Researches / İktisat Politikası Araştırmaları Dergisi is the property of Journal of Economic Policy Researches / Iktisat Politikasi Arastirmalari Dergisi and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The paper explores the role, evolution and ruling principles of the concept of “money” in the 21st Century. In this continuously evolving context, cryptocurrencies and Blockchain technology are widely considered the most relevant monetary innovations of the last decades. By means of a macro-founded logical-analytical approach combined with statistical evidence, the paper provides arguments: 1. dismissing the “innovation myth” behind cryptocurrencies because of de facto representing a comeback of the private issue of means of payments and, more problematically, seigniorage at its best; 2. confirming that crypto-tokens do not comply with basic, still ruling monetary principles; 3. suggesting that excess liquidity is already invested in crypto-markets (which are themselves “inflationary”, namely not backed by real value (i. e. GDP). The concrete risk is, once again in economic history, represented by facing a financial bubble. [ABSTRACT FROM AUTHOR]

In the paper we show that common currency areas tend to amplify the inefficiencies associated with lack of credibility of monetary policy. Lack of commitment in redistribution of seigniorage leads to excessive inflation and suboptimal taxation in the Monetary Union. Lack of commitment to inflation creates multiple inefficient equilibria that do not exist in a regime of national monetary independence. [ABSTRACT FROM AUTHOR]

The widespread prevalence of debasements in medieval Europe constitutes a puzzle under standard price theory because people voluntarily exchanged heavy coins for lighter ones; the difference being kept as seigniorage. I explore two properties of commodity monies that might make holding light coins more desirable, namely indivisibility and imperfect recognizability. If the agent trades indivisible coins, there are inefficiencies arising from over production of goods when the agent uses the heavier coin. Also, when coins are imperfectly recognizable, the heavy coin faces adverse selection. I find that under some parameters, indivisibility by itself leads to positive revenue following debasements, but in a way that eliminates co‐circulation of coins. While with a sufficient degree of imperfect information, debasements can generate positive revenue and also co‐circulation of coins. [ABSTRACT FROM AUTHOR]

This article describes and measures how the Bank of Amsterdam supplied a successful fiat money in a world of specie by offering the unlimited repo of large coins at a near-zero rate. Our data from 1736 to 1791 finds that such liberal access led to volatile loan levels and that the Bank responded with sterilization by means of open market operations. In this way, the Bank held its money stock at a roughly constant level and helped stabilize its value. Profit was another part of the Bank's policy framework, and the pursuit of seigniorage eventually compromised stabilization. [ABSTRACT FROM AUTHOR]

What or who governs central bank decisions? Most considerations focus on motivations. Instead, we consider the extent to which specific behaviors have adaptive value in the context of central banking. From that perspective, poor decisions are not the product of poor motivations. They are, instead, a product of the poor institutions within which central bank decision makers operate. [ABSTRACT FROM AUTHOR]

In the literature, political instability is shown to raise seigniorage and/or debt, but there is no debt‐seigniorage trade‐off. However, what happens when the IMF gets involved? Based on a political economy model of intertemporal public finance this paper presents qualitatively new and robust results. First, political instability causes myopic government behaviour and produces more debt, not more seigniorage. Second, IMF policies requiring debtor countries to achieve both monetary and fiscal stability at the same time are ineffective. Third and surprisingly at first sight, debt conditionality aiming at monetary stability is particularly effective in heterogeneous societies with unstable governments. [ABSTRACT FROM AUTHOR]

Empirical investigation of the average level of seigniorage in a cross-section of (up to) ninety countries for the period 1971-1990 suggests that optimum tax theory explains up to 40 percent of the cross-country variation in seigniorage, since seigniorage is higher where its deadweight tosses are probably lower and where deadweight losses from conventional taxation are probably higher, but that average government spending is nota determinant of seigniorage. Practical concerns about financing transitory government spending explain some of the remaining variation in seigniorage, and central bank independence and political instability are useful as well. In contrast, 90 percent of the cross-country variation in conventional taxation appears to be determined by the level of government spending and deadweight losses, and additional variables do not add to the results. [ABSTRACT FROM AUTHOR]

We examined a setting where decision making about financing a given amount of government spending is decentralized. Seigniorage is the residual tax that passively adjusts to meet the budget constraint. We place this budget-making process in a repealed game setting and characterize the cooperative tax-seigniorage function. Three main results are found: (i) Seigniorage and transitory changes in output are positively correlated. This result holds alter controlling for changes in government spending, (ii) A positive (negative) covariation between current-period government spending and transitory output strengthens (weakens) the positive relationship between seigniorage and transitory output, (iii) Seigniorage is negatively correlated with trend output growth. Time series empirical tests using annual data for twenty OECD countries support the first two results. A test using cross-section data on seventy-live countries confirms the third hypothesis. [ABSTRACT FROM AUTHOR]

The article presents an analysis of the multiple reserve requirement scheme of central banking and national fiscal and monetary policy. The traditional monetary concerns of small open economies are described, focusing on managing inflation while still financing the public deficit, usually through required bank reserve levels. The alternative method of multiple reserve requirements for differing currencies, cash and government securities, is formally outlined. Impacts of this scheme on inflation, seigniorage, and welfare are explored.

The article presents an analysis of the economic conditions of Argentina between the 1970s and 1990s in order to explore the connections between seigniorage and inflation effects. Econometric models providing a Laffer curve between the two elements are described. Three separate theories explaining the high inflation in relation to this curve are given and analyzed through the case of Argentina, questioning whether the inflation rate was above the revenue-maximizing rate. Additional elements explored include monetary/exchange rate paradigms and money demand.

The article analyzes the impact of money demand and seigniorage on high inflation phenomena. A model incorporating the three macroeconomic elements is developed through an optimizing consumer-investor-portfolio allocator with cash-in-advance constraints. It also presents both individual-country and combined cross-country time-series evidence that supports the notion that the semi-elasticity of money demand with respect to inflation varies with inflation itself. Empirical evidence from high-inflation countries during the 1960-1990 is also used to provide estimates of the seigniorage-maximizing inflation rate.

The article reports on inflation tax in an economy where there is no centralized decision maker, on competitive externalities, and on optimal seigniorage. Yugoslavia is given as an example of a monetary union that generated inflationary bias because it did not address competitive externalities. The inflation tax was determined by a group of decision makers who competed for tax revenues and printed paper money via the central bank, which functioned only as a printing agency. The central bank's failure to impose fiscal discipline and the ethnic and political frictions among provinces are assumed to be responsible for inflation. Budget constraints, time-consistent equilibrium, and the elimination of inflationary bias by a central government's control over monetary policy are mentioned.

The article comments on "Seigniorage As a Tax: A Quantitative Evaluation," by Ayse Imrohoroglu and Edward C. Prescott, which reported on simulation experiments concerning financial intermediation and interest-bearing and noninterest-bearing assets. The issue is the validity of their model for determining the costs of inflation. "Indexation and Discretionary Monetary Policy," a paper written by this article's author and Larry Ball, is discussed, as well as a staggered contract model for estimating wage and price variability during inflationary periods. The use of cash to smooth consumption and the inflation tax relative to the U.S. gross national product are mentioned.

The article evaluates seigniorage as a tax via a general equilibrium model, the efficacy of seigniorage relative to an income tax, and tax-monetary arrangements in the United States. Three sets of experiments are discussed which relate to interest payments on deposit accounts. The consumption smoothing role of liquid assets, inflation rate volatility, uncertainty in monetary policy, and the welfare cost of inflation are examined in mathematical models to determine after-tax real returns on assets. Data is given for economies with intermediation and inflation rates at three percent and six percent and for average real returns on Treasury Bills and savings accounts before and after taxation.

Brazil has had a long period of high ination. It peaked around 100 percent per year in 1964, decreased until the first oil shock (1973), but accelerated again afterward, reaching levels above 100 percent on average between 1980 and 1994. This last period coincided with severe balance of payments problems and economic stagnation that followed the external debt crisis in the early 1980s. We show that the high-ination period (1960{1994) was characterized by a combination of fiscal deficits, passive monetary policy, and constraints on debt financing. The transition to the low-ination period (1995{2016) was characterized by improvements in all of these features, but it did not lead to significant improvements in economic growth. In addition, we document a strong positive correlation between ination rates and seigniorage revenues, although ination rates are relatively high for modest levels of seigniorage revenues. Finally, we discuss the role of the weak institutional framework surrounding the fiscal and monetary authorities and the role of monetary passiveness and ination indexation in accounting for the unique features of ination dynamics in Brazil. [ABSTRACT FROM AUTHOR]

While sitting in their comptoir (office), merchants in early modern Holland were able to manage their plantations in the West Indies or, nearby, their seigniories in the Netherlands because they could make use of records spanning space and time. The merchants knew that information was not only instrumental in running their own business, but was also effective on a larger scale in exercising knowledge, control, and power. The performative power of records—that they may make, and in fact do make a difference in status before and after—was used in the management at a distance. From the seventeenth century, women became involved in business. They got access to the office where records supported business outside the home, but as part of everyday life. [ABSTRACT FROM AUTHOR]

Despite the lack of political accountability, ancient autocracies maintained a level of monetary stability that rivals modern democracies. This paper hypothesizes that it is the threat of counterfeiting that has constrained currency debasement. Unwilling to share seigniorage with counterfeiters, who are active only if currency is debased, the government refrains from debasement unless in extreme fiscal situations. To document the facts, we build a database of historical Chinese copper coins that covers the period from the Qin dynasty (221 BC-207 BC) to the Republic of China. We also use the introduction of the steam press in late Qing China as a natural experiment to test the theory. The steam press produced coins of fine patterns that counterfeiters were unable to mimic. As the theory predicts, the removal of the threat of counterfeiting triggered the most serious debasement in the history of the Qing dynasty (1644-1912). [ABSTRACT FROM AUTHOR]

A currency manufacturer obtains a tremendous advantage of the creation process called seigniorage and from the process of distributing money in the form of interest profits. Dollar is the most widely used instrument in the world, both in international transactions and foreign exchange. This phenomenon provides tremendous benefits to the United States unilaterally, both economic and political stability. While the countries of the world have a tremendous monetary dependence on the US with all its advantages, this is considered unfair and disadvantageous. A fair monetary system needs to be initiated so that all nations can benefit equally and reduce the hegemony of a particular country. [ABSTRACT FROM AUTHOR]

Abstract: The study investigates how the degree of exchange rate management conditions the relationship between seigniorage and governments’ natural resource revenues using a sample of 140 countries over the period from 1971 to 2012. It also disaggregates natural resource revenues to investigate if this relationship holds across the various types of natural resources. The main approach is to estimate dynamic panel data interaction models. The study finds that under exchange rate regimes characterized as fixed or of limited flexibility an increase in natural resource rents is associated with an increase in seigniorage. Under crawling currency bands and managed floating, an increase in natural resource rents has little association with seigniorage. Under exchange rate regimes permitting greater exchange rate flexibility, greater natural resource rents allow less reliance on seigniorage. Additionally, the direct relationship between natural resource rents and seigniorage is driven mostly by oil and natural gas. [ABSTRACT FROM AUTHOR]

Zimbabwe experienced record hyperinflation of 80 billion per cent per month in 2008. This article uses new data from Zimbabwe to investigate money demand under hyperinflation using an autoregressive distributed-lag model for the period 1980–2008. The results produce plausible convergence rates and long-run elasticities, indicating that real-money balances are cointegrated with the inflation rate and signifying an equilibrium relationship between the two series. Evidence is also presented suggesting prices were driven by increases in the money supply rather than by changes in price setting behaviour. The article uses the estimated elasticity on the inflation variable to calculate the maximum level of seigniorage revenue that could be raised in the economy. Actual seigniorage levels increased dramatically after 2000, with inflation eventually exceeding the rate required to maximize this revenue stream. This is discussed in relation to international financing constraints and the collapse of the domestic tax base. [ABSTRACT FROM PUBLISHER]

The article addresses the question of whether the U.S. Congress should allow banks to issue their own private currency. In this discussion, the article describes the role of the central bank in operating or regulating a payments system, the technological advances in currency, the effect of the National Currency Act, the loss of seigniorage, the effectiveness of monetary policy, the stability of monetary system, the history of uniform currency, and the need to develop models that explain the use and form of money.

This article describes the apocryphal nature of the official indicators of inflation and the indexation of the incomes of the population, and determines prescriptions for minimizing inflation. [ABSTRACT FROM AUTHOR]

This study employs a general equilibrium monetary search model to examine the effects of the recent dollarization in North Korea on seigniorage and prices. Maximum seigniorage is generated at a high rate of money growth when dollarization is mild. However, under a high degree of dollarization seigniorage declines sharply when the money growth rate is high. Accordingly, seigniorage can be increased by dedollarizing the economy through lowering the money growth rate. This finding implies that the post-2013 price stabilization may be a result of the restriction on printing of money with the aim of increasing seigniorage. This finding also recognizes that the North Korean authorities have little room for maneuver on monetary policy under the conditions of widespread dollarization. [ABSTRACT FROM AUTHOR]

A specific monetary tax − called periodic re-coinage − was applied for almost 200 years in large parts of medieval Europe. Old coins were frequently declared invalid and exchanged for new ones based on publicly announced dates and exchange fees. A theoretical framework of how periodic re-coinage works in practice is tested on Swedish coinage. The theory suggests that economic backwardness, limited monetisation of society and separate currency areas facilitated re-coinage. The Swedish experience is extraordinarily consistent with this theory. It is shown that Sweden adopted coin types similar to those minted in Continental Europe during the Middle Ages and the corresponding coinage and monetary taxation policies. Periodic re-coinage was applied with varying frequency from 1180 to 1290. However, monetisation increased in the late thirteenth century, making periodic re-coinage more difficult, and long-lived coins were introduced in 1290. With the end of periodic re-coinage, Swedish kings accelerated the debasement of long-lived coins, which continued until the beginning of the sixteenth century. [ABSTRACT FROM AUTHOR]

This paper presents a novel perspective on industrial practices in modern competitive capitalist economies, questioning, in particular, the link between prices, competition, and the quality of goods and services. It tries to characterize a business practice that consists in reducing prices and maintaining (or increasing) profit margins by reducing the quality of goods and services while still presenting them as the same as before. The paper is primarily concerned with the practice of producing inferior quality goods by reducing the quantity of inputs used in the production process, or mixing inputs with cheaper constituents. The proposed term for this practice, "industrial seigniorage," is based on the historical privilege of feudal lords (from Old French seigneur), who -- possessing the right to mint gold coins -- made a profit by adding cheaper base metals to the bullion. The present, essentially exploratory investigation attempts to delineate the widespread existence of such practices in various industrial sectors. It strives to explain the fundamental elements of consumer behavior that enable this practice to exist and discusses the effects of industrial seigniorage on several social issues. The attempt of the paper is finally to show that contrary to the ideology of capitalism, competition does not necessary lead to benefits for consumers or to an increase in product quality. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Historical Review is the property of University of Toronto Press and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The article refers to essays in "Handbook of Monetary Economics," comments on research methods used in "Seigniorage As a Tax: A Quantitative Evaluation," by Ayse Imrohoroglu and Edward C. Prescott, and focuses on the author's own views concerning inflation. Prescott and Imrohoroglu examined the welfare effect of inflation taxes with an experiment based on fixed nominal interest rates. The author states that transitory and persistent inflation result from negative aggregate supply shocks and from increases in the inflation tax without reductions in other taxes. He also states that consumers understand that higher price levels are associated with negative aspects of real disposable incomes.

The article focuses on the relationship between inflation rate and tax rate in the U.S. The article cites the work of economists James M. Poterba and Julio J. Rotemberg, who considered a framework in which government concerns with minimizing the deadweight loss of tax collection yields a suggested positive relationship between the inflation rate and the tax rate. In other words, as government spending rises, optimal financing would require raising both tax rates and seignorage so as to equalize the deadweight loss of the marginal dollar earned across the two alterative revenue-generating sources.

Controlling for a more comprehensive set of economic structure variables and using system generalized method of moment ( GMM) dynamic panel estimation, we consider the determinants of seigniorage. While we confirm some results found in previous literature, including an inverse relationship of financial development and exchange rate management to seigniorage, we find little evidence that political instability and polarization lead to greater reliance on seigniorage. We also find robust evidence that the size of the shadow economy and natural resource rents are directly related to seigniorage, the latter result likely a result of exchange rate management. Thus, an effective strategy to reduce reliance on seigniorage is to lower the incentives to operate in the shadow economy, while exchange rate management may be counter-productive in countries with considerable natural resource rents. ( JEL E5, O50) [ABSTRACT FROM AUTHOR]

This paper analyzes the relationship between corruption and inflation for a sample of 100 developing and developed countries representing five regions (Americas, Europe, Middle East and North Africa, Sub-Saharan Africa and Asia Pacific) over the period 2000-2012. Various model estimations are carried out using alternative techniques and two indicators of corruption. Our findings provide evidence of a significant and positive relationship between all country corruption measures and inflation. Countries with a corrupted environment and bad governance use seigniorage as a source of revenue which induces higher monetary expansion and therefore higher inflation rates. After controlling for money supply, our results suggest that corruption is affecting inflation via other channels. Our results show also that the negative effect of corruption on inflation is different across subsample countries. The lack of sound and committed institutions in developing and emerging is a key point in explaining these disparities. [ABSTRACT FROM AUTHOR]

Monetary policy is superneutral in an overlapping generations model. Previous authors have argued that superneutrality does not hold in such a setting. However, the standard results rely on the counter-factual premise of helicopter money and are overturned if money creation through open market operations is taken into account. This result suggests that a more realistic representation of monetary policy may generally be helpful. [ABSTRACT FROM AUTHOR]

There is convincing empirical evidence in cross-section data of a positive correlation between the level of corruption and the rate of inflation. This paper explores whether this correlation can be a consequence of a government exploiting seigniorage to compensate for revenue lost to corruption. We embed corruption within an overlapping generations economy that has money as the only store of value and in which the government optimizes the rate of monetary growth. Three different forms of corruption are modeled, and it is shown that all three can be positively correlated with increased inflation. [ABSTRACT FROM AUTHOR]

This paper studies the effects of alternative tax policies (a consumption tax, seigniorage tax, and tax switch) on economic growth under different methods of government budget adjustment in a monetary endogenous growth model with a labor-leisure choice and a cash-in-advance constraint which is only imposed on consumption. It is found that the validity of both the Mundell-Tobin effect and the consumption tax neutrality crucially depends on the adjustment methods used to maintain the balanced government budget. In addition, we find that a switch from a consumption tax to a seigniorage tax unambiguously enhances economic growth. This result stands in sharp contrast to that of Ho et al. (J Money Credit Bank 39:105-131, ), in that it does confirm the validity of the qualitative equivalence between the money-in-the-utility-function and cash-in-advance approaches in terms of the effect of tax shifting away from a consumption tax towards a seigniorage tax. [ABSTRACT FROM AUTHOR]

The paper deals with the discussion on the alternative ideas on money, created by Silvio Gesell, Frederic Soddy and Karl Ballod. Particularly, the ideas of full-reserve banking, privilege of seigniorage and the principle of demurrage are discussed in the context of possible implementation of these ideas in a future economy. Large part of the paper is library-based, considering and briefly explaining the previously mentioned ideas, and supplementing them with the opinions of the modern economists. The discussion of the possible evolutionary way to implement those ideas is based on the logical analysis and conclusions, derived from the discussions of the author with academicians and financiers. The results lead to the conclusion that these ideas, which may seem unrealistic according the existing paradigm of growth, may turn out to be useful to form the basis of a new monetary and financial system within the new economic paradigm. The paper is an insight into unorthodox proposals on money, which may be useful to specialists and students, investigating monetary and financial systems. [ABSTRACT FROM AUTHOR]

Do immigrants have a higher demand for large-denominated banknotes than natives? This micro study examines whether banknote orders for CHF 1,000 notes are concentrated in Swiss municipalities with a high foreign-to-native ratio. The evidence for 251 Swiss municipalities finds that immigrants hoard fewer CHF 1,000 banknotes than natives. This empirical result means that immigration reduces seigniorage (per person) as measured by banknote orders. A 1% increase in the immigrant-to-native ratio is coincident with a reduction in banknote orders by CHF 4,000. This reduction is attributed to specific traits linked to immigrants. [ABSTRACT FROM AUTHOR]

This paper examines the growth and welfare effects from an increase in the rate of money supply in an Ak type growth model with a relative wealth-enhanced social status motive, production externalities, and liquidity constraints. When only consumption is constrained by liquidity, fast money supply can hasten output growth unless seigniorage revenue is wasted and production externalities do not exist. We find that even though money growth normally promotes economic growth, it does not improve welfare when capital stock is over-accumulated. In general, an optimal monetary policy minimizes seigniorage. Our results also conclude that the optimal monetary policy rarely follows the Friedman rule. [ABSTRACT FROM AUTHOR]

We adapt the monetary model (Sidrauski 1967) to study the hypothesis of anticipation of future consumption. We assume that anticipation of future consumption affects an agent's instantaneous utility and that all effects of future consumption on current well-being are captured by the stock of future consumption. Monetary policy effectiveness is thereby reduced and a zero nominal lower interest rate (and thus the Friedman rule) is destabilizing. Given this, we can derive a 'just stable' equilibrium nominal interest rate with matching definitions for inflation and monetary growth. We demonstrate that these implied lower bounds match their historical analogues well. [ABSTRACT FROM AUTHOR]

This article transcripts and comments a hitherto unpublished letter by David Ricardo, dated 19 January 1823 and addressed to Grenfell. In this letter Ricardo opposes the adoption of a double standard of money, two years after the return to convertibility of banknotes and in the midst of an economic recession that pressed for drastic monetary changes. It contains an argument – linking the double standard of money, the seignorage on the silver coin, the behaviour of the Bank of England, and the fall in the value of the pound – which is to be found nowhere else in Ricardo's works. [ABSTRACT FROM PUBLISHER]

The article focuses on the future of seigniorage, a revenue made by the government through money creation, as a new tax to finance the European Union's (EU) budget. It cites the positive and negative attributes of the seigniorage. It notes that seigniorage is generated by a unique key European Monetary Union policy. It also notes that the National Central Bank (NCB) and the European Central Bank (ECB) are against to seigniorage.

Financial crisis triggered in 2007 outlined once again the weaknesses and flaws of the current international financial system. In the mean time it created the opportunity for rethinking and redrawing its architecture in order to make it more flexible, more legitimate, more resistant to shocks and more effective in preventing and addressing financial crises. Based on these considerations our study aims, in its first part, to summarize the main flaws of the current monetary system. In its second part, the study will try to present the challenges launched to the system as a consequence of the crisis' effects, describing possible actions and treatment options in order to address these challenges and flaws. In this way we intend to contribute to the ongoing debate on strengthening the international monetary system. [ABSTRACT FROM AUTHOR]

In developing countries, governments are tempted to, and they often do finance their budget deficits by issuing currency. This leads to inflation, and ultimately, the source of the incomes to the budget are the inflation tax and the seigniorage. The mechanism that is used is the direct loan, from the Treasury (the Government's cash desk) from the central bank, which means creating a an additional monetary base. Basically, seigniorage is not different from the financing of the budget deficit, by the central bank, by buying government bonds, and the effect of this practice is the emergence if the phenomenon of taxing inflation, by deteriorating the value of the financial assets owned by banks and non-banks. This paper is structured as follows: conceptual aspects concerning the seigniorage in section 1, section 2 showing the models for calculate the level of seigniorage, section 3 estimates the evolution of Seigniorage during the crisis. [ABSTRACT FROM AUTHOR]

Despite financial innovations that have created important new substitutes for cash usage, per capita holdings of U.S. currency amount to $2950. Yet American households and businesses admit to holding only 15% of the currency stock, leaving the whereabouts of 85% unknown. Some fraction of this unaccounted for currency is held abroad (the dollarization hypothesis) and some is held domestically undeclared, as a store of value and a medium of exchange for transactions involving the production and distribution of illegal goods and services, and for transactions earning income that is not reported to the IRS (the unreported economy hypothesis). We find that the percentage of U.S. currency currently held overseas is between 30 and 37% rather than the widely cited figure of 65%. This finding is based on the official Federal Reserve/Bureau of Economic Analysis data which is a proxy measure of the New York Federal Reserve's (NYB) 'confidential' data on wholesale currency shipments abroad. We recommend that the NYB data be aggregated so as to circumvent confidentiality concerns, and be made readily available to all researchers in order to shed greater light on the questions of how much U.S. currency is abroad and on the particular location of overseas U.S. dollars. The newly revised official estimates of overseas currency holdings are employed to determine the Federal Reserve's seigniorage earnings from 1964-2010, which have provided a $287 billion windfall for U.S. taxpayers. Overseas currency stock data are also used to derive estimates of the domestically held stock of currency as well as narrow and broad measures of domestic monetary aggregates. These domestic monetary aggregates are believed to be better predictors of future economic activity than traditional monetary aggregates and are tested to determine their ability to predict fluctuations in real output and prices. Domestic cash holdings are finally used to estimate the size of the U.S. unreported economy as measured by the amount of income that is not properly reported to the IRS. By 2010, we estimate that legal and illegal source unreported income' is $1.9-$2.4 trillion, implying a 'tax gap' in the range of $400-$540 billion. Currently, we estimate that 18-23% of total reportable income is not properly reported to the IRS. [ABSTRACT FROM AUTHOR]

Ever since the setting up of the EMU, many scholars have argued that the Euro will take its place alongside the dollar and perhaps even replace it as international money. The theory behind this point of view is represented by search-theoretic models. The fundamental shortcoming of the traditional version of these models is that they fail to make a distinction between different types of money, in particular between commodity money and fiduciary money. In the international context a fiduciary money can be accepted only when a political exchange is possible between a leading country which has an interest in producing trust in the future value of its currency and other countries which attach no importance to the relative gains the issuing country acquires by exploiting the privilege of seigniorage. The Bretton Woods system and the dollar standard, although based on fiduciary monies, have worked thanks to the institutional framework maintained by the United States and accepted by other countries. Unlike the United States, the euro area is not in a position to exercise any form of political leadership on the international scene. As things stand the euro does not represent a threat to the dollar and it is bound to remain a regional money. [ABSTRACT FROM AUTHOR]

Although high inflation is associated with the spread of paper monies, rapid price increases are well known under the metallic standard from several countries, caused by the debasement of coins. The exact mechanism is still a puzzle. If agents were rational, why did they accept inferior coins at par with better ones? This paper compares five debasement cycles that occurred in Sweden-Finland 1350-1594. During the initial phase of such cycles coins tended to circulate by-tale, while by-weight circulation was most common towards the end of the cycles. A premium on the heavier coins implied that they were not driven out of circulation. The seignorage rate was significant during the initial phases of the cycles, while it decreased when prices and exchange rates adjusted in response to the debasement, prompting a recoinage, when the monetary unit was strengthened. It is this shift from by-tale to by-weight circulation that explains the high inflation rates that could occur before the rise of paper money. [ABSTRACT FROM AUTHOR]

In the summer of 1861, the United States embarked on its first widespread use of paper money: the Demand Notes of 1861. Although their convertibility into gold ended at the end of that year, they remained acceptable for tariff payment at a par with gold coin while they were gradually replaced with paper money that did not share this provision, the Greenbacks. We present daily observations of exchange rates between the Notes, Greenbacks, and gold for the extended period during which they simultaneously circulated. These exchange rates substantiate our revisionist notion that the Notes were replaced because the tariff provision prevented them from generating sufficient seigniorage for wartime needs. ( JEL E42, N12, N22) [ABSTRACT FROM AUTHOR]

This article provides an overview of recent research into the macroeconomic costs and benefits of monetary unification. We are primarily interested in Europe's monetary union. Given that unification entails the loss of a policy instrument, its potential benefits have to be found elsewhere. Unification may serve as a vehicle for beneficial institutional changes. In particular, it may be a route toward an independent monetary policy, which alleviates the scope for political pressure to relax monetary policy. Unification also eliminates harmful monetary policy spillovers and competitive devaluations. We explore how disagreement between the monetary and fiscal authorities about their policy objectives can lead to extreme macroeconomic outcomes. Further, we pay considerable attention to the desirability (or not) of fiscal constraints and fiscal coordination in a monetary union. Monetary commitment and fiscal free riding play a key role in this regard. Similar free-riding issues also feature prominently in the analysis of how unification influences structural reforms. We end with a brief discussion of monetary unification outside Europe. The cost-benefit trade-off of unification may differ substantially between industrialized and less-developed countries, where differences in fiscal needs and, hence, the reliance on seigniorage revenues may dominate the scope for unification. [ABSTRACT FROM AUTHOR]