Central bank responsibility, seigniorage, and welfare

Joydeep Bhattacharya and Joseph Haslag

No 9909, Working Papers from Federal Reserve Bank of Dallas

Abstract: Historically, countries have relied on seigniorage. In this paper, we explore a set of features in which a benevolent government will rely on seigniorage. We use a simple overlapping generations model with return-dominated money. Money is valued because of a reserve requirement. The government has to raise a fixed amount of revenue solely for the purposes of making transfers to the old. It has two revenue-generating options: lump-sum taxes (money creation) under the control of the treasury (central bank). We restrict the amount of seigniorage collected to be nonnegative and require that the government's budget constraint be satisfied on a per-period basis. Our question is, Can we find stationary monetary competitive equilibria that are welfare maxima, given that the money stock cannot contract? Computational experiments reveal, somewhat surprisingly, that the answer is yes. Indeed, in our setup, benevolent governments may require that at least part, if not all, of the revenue be raised via money creation.

Keywords: Banking structure; Banks and banking, Foreign (search for similar items in EconPapers)
Date: 1999
New Economics Papers: this item is included in nep-dge and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.dallasfed.org/~/media/documents/research/papers/1999/wp9909.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:99-09

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Dallas Contact information at EDIRC.
Bibliographic data for series maintained by Amy Chapman ().