This paper constructs a two-country overlapping generations model with two distinct fiat moneys in which seigniorage revenues are used to finance a local public good.
Countries differ both in endowments and in the preference for public good.
Under perfect mobility of financial assets benevolent governments choose their rates of growth of money supply strategically and private individuals have perfect foresight. WE characterize the equilibrium of the policy game and show how the degree of financial integration affects the welfare of each country.