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Developing country inflation is in the headlines again. Mainstream macroeconomics typically ignores the role of conflict while non‐mainstream work tends to ignore macroeconomic constraints. This paper revisits the issue employing a dependent economy framework with eclectic characteristics. Specifically, I explore the mechanisms that propagate both real and monetary sources of inflation in the presence of real wage resistance and distributional conflict. The analysis shows that the inability to pay for subsidies with taxes or bond issuance in a stylized developing economy could create a situation where a relatively small shock leads to sustained and accelerating inflation and a wage‐price spiral, thanks to conflicting claims on income. Subsidies to protect consumers from external price shocks could, similarly, leave a country vulnerable to accelerating wage‐price spirals as the stabilizing relative price effects of a declining foreign asset position are dampened. Distributional conflict thus plays the role of sustainer rather than the primum mobile. Price controls could, in theory, better enable inflation management if these do not result in redistribution toward spenders. Such controls, however, create other trade‐offs for countries facing balance‐of‐payments fragility. [ABSTRACT FROM AUTHOR]

The observed weights of ancient coins are usually less than the nominal "ideal" weights of the coin standards to which they belong because state authorities took a fee—"seigniorage"—for minting coins to cover costs and to make a profit. The basis for calculating the amount taken by the state and the way it administered manufacture are not well understood. Here we analyze the weights of 1344 of the earliest coins of Athens (c. 550–479 bce). We reveal a parabolic relationship between the cost of the silver and the weights of the coins whereby a progressively higher proportion was taken as the denomination decreased, meaning that the smaller the coin, the larger was the proportion of silver taken from it. There was tight control of the minting process and mathematical sophistication in precisely adjusting the silver content from the first introduction of coinage. It also made minting a profitable business. Changes in minting practice can be detected with the introduction of the Athenian "owl" coins, when the percentage of silver taken by the state increased and the spread of weights widened to include coins weighing more than the nominal weight. The latter indicates a significant shift toward monetization of the economy. [ABSTRACT FROM AUTHOR]

Using an augmented two‐sector endogenous growth model for a small, open economy characterized by human capital accumulation and productive government expenditure, we analyse the nature of the relationship between openness and growth. External openness enters the human capital accumulation function directly. Productive government expenditure affects human capital accumulation, relying on seigniorage revenue as finance where seigniorage is itself dependent on the level of openness. The findings indicate two, opposing effects of openness on growth ‐ a direct effect of openness on growth through knowledge spillovers that affect human capital accumulation, and an indirect effect of decreasing seigniorage revenue on growth through decreasing productive government expenditure on human capital. We discuss conditions under which the openness‐growth curve can be concave/convex, without specifying theoretical functional forms or values to unknown parameters in the model to provide concise theoretical results. Rather, drawing samples of exact model‐match countries over 1980–2011, we rely on a semi‐parametric, data‐driven empirical approach to provide empirical impetus to the theoretical outcomes reported. We show the relationship between openness and growth is non‐linear. Specifically, inverted U–shaped. The result suggests that openness only have a positive impact on the growth‐rate until a certain threshold‐level, thereafter, the effect is negative. [ABSTRACT FROM AUTHOR]

Czech monetary and fiscal policies require fundamental reform, even without considering the current war in Ukraine. The tax structure can be rationalized within 1–2 years. The very introduction of a single collection point must be taken seriously, and there is no need to undertake a fundamental tax reform to implement its main stage. Czech social security contributions are very specific, dominated by their tax nature. This allows for a quick consolidation of employer contributions into one levy to the state budget and the inclusion of employee contributions in personal income tax. Only slightly more politically challenging is the integration of dividend income taxation into corporate tax and the removal of interest from corporate tax costs. The OECD recommendations are one-sided, mechanically oriented according to the neoliberal welfare regime. Our analyses and subsequent proposals do not foresee and do not require any reform of social security benefits, including public funding of healthcare. Strengthening value-added tax in the tax structure is completely wrong. The overall insufficient taxation of value added in the Czech financial sector needs to be eliminated. Czech monetary policy is not very effective in the fight against inflation, the link to overall economic policy is lacking. This policy has created excessive foreign exchange reserves that can be transferred to the state assets. It is economically desirable to link the Czech currency to the euro. The proceeds of the issue of all money belong to the state budget.

This paper advances a simple framework explaining how monetary policy normalization ("exit policies") may impact central bank profits. The cases of seven central banks of major and smaller economies serve as an illustration. The notion of the break-even point is applied to study the financial situation of these institutions for the period of 2014–2021. During the normalization process, interest rate increases may adversely affect profit changes, and through transfers may have an impact on the fiscal space available to the governments, creating political economy concerns. Possible remedies are discussed together with accompanying policy dilemmas. [ABSTRACT FROM AUTHOR]

ABSTRACT A political economy model is developed to provide a rationale of monetary policy in high inflation regimes, such as the Brazilian experience until the advent of the Plano Real. Decision making of monetary policy is assumed to be decentralized, where several decision-makers competitively determine the quantity of money. It is shown that equilibrium inflation is higher than under the alternative monetary regime where decision making is centralized at the Central Bank. An important additional feature of this political economy model is that it does not rely on time-inconsistency to generate high and sub-optimal inflation.

The aim of the paper is to show, using a simple two-period overlapping generations model in which goods are produced solely by labour in a monopolistically competitive industry, that a continuous budget deficit (including the interest payments on government bonds) is necessary to achieve and maintain full employment under economic growth driven by technological progress. Since the budget deficits must be continuous, it might be better if they were financed by seigniorage rather than government debt. Since the budget deficit due to the issuance of government bonds puts pressure on fiscal expenditures in the amount of interest payments, a budget deficit of the same size due to seigniorage is a more effective use of the budget. It will also be shown that to achieve full employment from a recession with involuntary unemployment the extra budget deficit is necessary.

This study analyzes the nature of money through the lens of the international principles of accounting and lays the foundations of what it calls the accounting view of money (AVM). Using international accounting principles, the AVM argues that the fiat monies issued by the state (typically, cash, banknotes, and central bank money) are not debt and that in fractional reserve regimes, only a share of commercial bank money can be regarded as debt. The AVM argues, instead, that state monies and the nondebt share of commercial bank money are net wealth of their holders and net worth (equity) of their issuers and determines how the seigniorage associated with money issuance should be accounted for correctly in the financial statements of the issuing institutions. The AVM points to the correct way to account for the various forms of money in the financial statements of the issuing institutions, clarifies what the different accounting treatments imply for a correct understanding of the concept of money, and evaluates the related economic and economic policy implications.

This study proposes to assess the seigniorage perceived by the Algerian's budgetary authority as well as its link with the budget deficit, for the period which spans between 1965 and 2018. The seigniorage calculation is inspired by a large review of the literature. Analysis of the composition of seigniorage illustrates that purely monetary seigniorage was used in particular before 1979. Since then, the inflation tax has been the essential component of the seigniorage calculated between 1980 and 2018. The graphical and econometric results, using the ARDL model, show at the same time, the importance of seigniorage in financing Algerian's budget deficit, notably by the inflation tax in the short and long term. [ABSTRACT FROM AUTHOR]

This paper is concerned with measuring the seigniorage in Romania since the fall of communism and the potential gains after passing to euro. Starting from the balance sheet of the central bank, we estimated these levels of seigniorage for a period of 27 years. Our findings suggest that this source of revenue was at very high rates in the period of the 90’s, mostly due to the huge prolonged inflation rates. Ever since the independence of the central bank, these levels of seigniorage dropped and became constant, at around 1-2% of the GDP. Also, we computed the potential gains due to euro adoption. We showed that as Romania converge with the rest of the Eurozone its seigniorage potential gains from euro adoption drops. Because these gains are only very small in relation to national income, we argue that the implications of giving up own currency are not budget related.

The aim of this paper is to present the costs and benefits of applying dollarization. The most common reason for accepting, in whole or in part, a foreign currency is the presence of a high and volatile inflation rate, which is followed by the significant volatility of the exchange rate, as well as a distorted confidence in its own currency. Likewise, highly dollarized countries most often characterized by a lower level of the development of the financial market. Dollarization contributes to lowering the costs of transactions in international trade and to achieving the price and financial stability, as import inflation is lower than domestic. On the other hand, the presence of full dollarization means a loss of seigniorage as the monetary authorities’ revenue from the printing of money, as well as the limitation of the implementation of the lender’s function in the last instance. The results of the analysis indicate that, in the dollarized countries, there was a decrease in the inflation rate, macroeconomic stability was established, and financial integration was present as well. The analysis also showed that the loss of income from seigniorage, measured as a share in the gross domestic product, is not negligible, while the lender’s function in the latter instance can be compensated through the formation of stabilization funds and the conclusion of contracts with financial institutions.

Purpose – Governments may finance its expenditures through multiple resources; however, seigniorage and borrowing are commonly used. The authors think that in the presence of corruption, the use of public finance may result in inflationary effect that leads to higher level of inflation, which in turn affects the whole economy. Design/methodology/approach – This paper investigates if the variation in corruption levels jointly with public finance means, seigniorage and borrowing, accounts for the variation in the level of inflation. This paper uses panel data of 72 countries through the period 1995-2011. Findings – The author find that corruption jointly with public finance means, seigniorage and borrowing, increase the level of inflation. This finding can address the misuse of these public finance means where corruption is prevalent. Originality/value – This paper captures the joint effect of corruption with two different means of public finance, seigniorage and borrowing, on the level of inflation within 72 countries through 1995-2011.

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It is widely believed that increase in money supply increases inflation rates in the long run. Dissenting evidences have later emerged to show that the inflation-money growth link has weakened over time. This study provides a political interpretation of inflation rates dynamics by investigating corruption as a potential risk factor associated with high inflation in the Economic Community of West African States (ECOWAS) using panel logit model. All 15 ECOWAS members were selected and studied between 1995 and 2019. Estimates revealed that, in the long run, ECOWAS inflation was significantly determined by past inflation shocks, level of corruption, real GDP and exchange rates; the link between inflation and money supply growth had indeed weakened over time. In particular, results showed that, other things given, a unit increase in the level of corruption increased the risk of high inflation by 82.6%. Results also indicated that seigniorage was not enough to explain the link between inflation and corruption, suggesting that some other channels exist through which corruption affects inflation. In addition, taking 0.5 as the benchmark for forecast probabilities, the logit model reconstructed all the high inflation episodes experienced in ECOWAS in spite of the outlying observations of Liberia and Guinea. The study therefore concludes that other things given, the more corrupt ECOWAS members are, the higher the likelihood to experience high inflation.

We examine the use of central bank equity as an unconventional monetary policy tool. In this setting, a central bank employs digital currency to transfer digital cash to each household, thus supporting consumption directly when needed. The asset side of the central bank's balance sheet remains unchanged, and the creation of new digital cash is offset by a decrease in central bank equity. The central bank thus incurs an immediate loss but does not take on any additional risks for its future income statements. We address several objections to this policy, paying particular attention to the claim that weakening the financial strength of the central bank endangers long-term price stability. Through a meta-analysis of 176 estimates reported previously in the literature, we find that central bank financial strength has not historically correlated with inflation performance. [ABSTRACT FROM AUTHOR]

Copyright of Revista CIENCIA UNEMI is the property of Universidad Estatal de Milagro (UNEMI) 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 present article sets out the scientific approach of Dmitry Sergeevich Chernavskii to the modelling of economic processes. It recounts the history of works of Dmitry Sergeyevich on the economic front, its milestones and achievements. One of the most important advances in the economic analysis was the prediction by a team of scientists headed by D. S. Chernavskii, the major crises that have occurred in our country over the last 20 years, namely, the default of 1998, the crisis of industrial production in the second half of the 2000s, the 2008 crisis and the ensuing recession. As an example, the dynamic analysis of the global macroeconomic processes shows the model of functioning of the dollar as the world currency. On this particular example shows the possibility of seigniorage due to the issue of the dollar and the calculated "window of opportunity" that allows you to issue dollars as the global currency, without prejudice to its own economy. A model for the development of a closed society (without external economic relations) in the one-product approach is considered as an example of dynamic analysis of the economy of a separate state. The model is based on the principles of market economy, i.e. the dynamics of prices is determined by the balance of supply and demand. It is shown that in the general case, the state of market equilibrium is not unique. Several steady states with different levels of production and consumption are possible. Effect of addressed emission of money in underproductive state is considered. It is shown that, depending on its size it can lead to the transition to a highly productive condition, and just cause inflation without transition. The relationship of these results with the "Keynesian" and "monetarist" approaches is discussed.

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]

The aim of this paper is to present the costs and benefits of applying dollarization. The most common reason for accepting, in whole or in part, a foreign currency is the presence of a high and volatile inflation rate, which is followed by the significant volatility of the exchange rate, as well as a distorted confidence in its own currency. Likewise, highly dollarized countries most often characterized by a lower level of the development of the financial market. Dollarization contributes to lowering the costs of transactions in international trade and to achieving the price and financial stability, as import inflation is lower than domestic. On the other hand, the presence of full dollarization means a loss of seigniorage as the monetary authorities' revenue from the printing of money, as well as the limitation of the implementation of the lender's function in the last instance. The results of the analysis indicate that, in the dollarized countries, there was a decrease in the inflation rate, macroeconomic stability was established, and financial integration was present as well. The analysis also showed that the loss of income from seigniorage, measured as a share in the gross domestic product, is not negligible, while the lender's function in the latter instance can be compensated through the formation of stabilization funds and the conclusion of contracts with financial institutions. [ABSTRACT FROM AUTHOR]

During the U.S. Civil War, the Confederate Congress adopted three currency reforms that were intended to reduce the quantity of Treasury notes in circulation by inducing the money-holding public to exchange their notes for long-term bonds. In this paper, we examine the political factors that influenced the adoption of the reforms and their effect on the flow of seigniorage - revenue that the government derived by using the newly-printed Treasury notes to purchase the goods and services it required. We argue that the bifurcation of the Confederate Congress into two groups – those legislators that represented the Confederacy's interior and those from areas no longer under Confederate control – contributed to the adoption of the reforms. Our findings indicate that representing an area outside of the rebel government's control increased the likelihood that a legislator would support efforts to reform the currency by over 90 percent. In addition, our results indicate that the rate of monetary expansion in the South was below that which would have maximized the revenue from seigniorage. We find that the reforms reduced the flow of seigniorage by approximately 57 percent, depriving the Confederate government of much-needed revenue. [ABSTRACT FROM AUTHOR]