The Political Economy of Seigniorage

Ari Aisen and Francisco Veiga

No 2005/175, IMF Working Papers from International Monetary Fund

Abstract: While most economists agree that seigniorage is one way governments finance deficits, there is less agreement about the political, institutional, and economic reasons for relying on it. This paper investigates the main determinants of seigniorage using panel data on about 100 countries, for the period 1960-1999. Estimates show that greater political instability leads to higher seigniorage, especially in developing, less democratic, and socially polarized countries, with high inflation, low access to domestic and external debt financing and with higher turnover of central bank presidents. One important policy implication of this study is the need to develop institutions conducive to greater economic freedom as a means to lower the reliance on seigniorage financing of public deficits.

Keywords: WP; GDP; country; central bank; government crisis; Seigniorage; political instability; institutions; ind. country; seigniorage government; country's creditworthiness; way country; sensitivity analysis; ability to tax; Monetary base; Inflation; Central bank autonomy; Agricultural sector; Africa; Western Hemisphere; Asia and Pacific; Global (search for similar items in EconPapers)
Pages: 26
Date: 2005-09-01
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: The political economy of seigniorage (2008)
Working Paper: The Political Economy of Seigniorage (2005)
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