 Seignorage in Highly Indebted Developing CountriesM.F. McPherson Working Papers from Harvard - Institute for International Development Abstract: Seignorage is the capital gain generated by the creation of reserve money. The literature on seignorage shows that countries with highly developed and deep financial systems generate few resources relative to national income (or government revenue) from seignorage. By contrast, countries with shallow financial systems and profligate governments appear to gain access to large amounts of real resources when they create reserve money. Results obtained in this paper suggest there is no anomaly. Highly indebted developing countries resorting to money creation to finance their activities do not generate large amounts of seignorage, particularly on a sustained basis. In fact, when all of the consequences of rapid reserve money growth are considered --- including the increased local currency cost of servicing and amortizing external debt due to exchange rate depreciation --- these countries incur a net loss from reserve money creation. Keywords: DEBT; MANAGEMENT; EXCHANGE RATE; INFLATION; MONEY (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fth:harvid:696 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Working Papers from Harvard - Institute for International Development CAER Project, Harvard Institute for International Development, 14 Story Street, Cambridge MA 02138O. Contact information at EDIRC. |
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