Monetary Indexation and Revenues from Money Creation: The Case of Iceland

International Monetary Fund

No 1990/020, IMF Working Papers from International Monetary Fund

Abstract: This paper discusses the effects of monetary indexation on the revenues from monetization in Iceland. The paper starts by showing that monetization revenues fell sharply after indexation was introduced in 1979 and evaluates the different and partly ambiguous factors behind this development. The fiscal consequences are then examined in light of the fact that revenues from monetization have traditionally made up a substantial part of Government revenues in Iceland. Different policy options are simulated using the framework of the public finance approach to inflation. The simulations focus on the relation of fiscal deficits to inflation, output growth, and internal and external debt.

Keywords: WP; demand; interest rate; economic growth; monetary indexation; revenues from money creation; indexation scenario; financiable deficit; indexation period; inflation tax revenue; public finance; case of indexation; indexation of base money; indexation of financial assets; Switching-term deposit; Inflation; Currency issuance; Real interest rates; Monetary base; Demand for money (search for similar items in EconPapers)
Pages: 38
Date: 1990-01-01
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