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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]

How did it become possible to exchange apparently valueless pieces of paper for goods? This paper provides an equilibrium account of the transition between barter and fiat-money regimes. The explanation relies on the intervention of a self-interested government which must be able to promise credibly to limit the issue of money. To achieve credibility, the government must offset the benefits of seigniorage by internalizing some of the macroeconomic externalities generated by the issue of fiat money. The government's patience and the extent of its involvement in the economy are key determinants of whether the transition can be accomplished. [ABSTRACT FROM AUTHOR]

This paper provides empirical evidence on the effects of financial repression on government finances. Financial repression is a combination of controls on international capital flows with restrictions on domestic interest rates. The result is an artificially low cost of domestic funding to governments. We estimate the government revenue from financial repression as the difference between the foreign and the domestic cost of funds, times the domestic stock of government debt. The evidence indicates that the revenue from financial repression can be quite substantial, and for several countries it is of same order of magnitude as seigniorage. (JEL H60, H63, 1487, F34, F36) [ABSTRACT FROM AUTHOR]

The importance of seigniorage relative to other sources of government revenue differs markedly across countries. This paper tries to explain this regularity by studying a political model of tax reform. The model implies that countries with a more unstable and polarized political system will have more inefficient tax structures and thus, will rely more heavily on seigniorage. This prediction of the model is tested on cross-sectional data for 79 countries. We find that, after controlling for other variables, political instability is positively associated with seigniorage. [ABSTRACT FROM AUTHOR]

It is the purpose of this article to explore how bank regulation and the state of competition in the banking industry affect both government revenue and the bank profits. The model consists of a three-asset economy: government fiat money, with zero yield which serves as currency and reserves of banks; deposits issued by the banking system; and real assets, yielding a fixed real rate of return, set at zero for convenience. There is no uncertainty, the economy experiences no real growth, and the government controls the nominal supply of high-powered money and the reserve ratio on deposits issued by banks. Under these conditions the long-run equilibrium is marked by an inflation rate which is equal to rate of growth of high-powered money and is equivalent to the market rate of interest. This analysis demonstrates that the revenue derived from monetary expansion is critically dependent on the state of regulation and competition in the banking industry. Government seigniorage is higher if the banking system is competitive than if it is monopolized since deposit rates are lower under monopoly banking.

The attention of the public has been fixed for some time on the continued rise of prices and the increase in the cost of living commonly supported to be a consequence. From time to time suggestions have been made with a view of providing checks or remedies for changes in prices. The most notable of recent years is that brilliant suggestion recently made by Professor Irving Fisher for abstracting seigniorage on the coinage of gold in order to keep the value of the gold coin at a point determined by index numbers; or, in other words, by the indirect application of the so-called tabular or multiple standard. But one must be on guard against permitting oneself to be carried away with belief in the possible success of a brilliant device without careful consideration of the question whether the thing that is accomplished by this device is the thing at which after all one is aiming. Public uneasiness aroused by the change of prices in one direction or another over considerable periods and to a considerable degree, is not a new phenomenon; nor are attempts to meet the difficulties, real or supposed, which their changes cause, of recent origin.

This article presents information on the book "Taxation in Modern China," edited by Donald J.S. Brean. The book focuses on the theory and development of tax policy in China consistent with the nation's broader agenda of economic liberalization, as of June 1999. Various topics discussed in the book are, China's fiscal deficits during 1986-95, enterprise taxation and transition to a market economy, marginal effective tax rates in the reformed tax system, whether seigniorage revenue can keep China's financial system afloat, central-provincial-local fiscal relations, intergovernmental fiscal relations in China in international perspective and fiscal dualism in China.