Central bank responsibility, seigniorage, and welfare
By: Joseph H. Haslag, Joydeep Bhattacharya.
Contributors: Bhattacharya, Joydeep.
Series: Research Department working paper ;; 9909; Working paper (Federal Reserve Bank of Dallas. Research Dept. : Online) ;; 9909.
Publisher: Federal Reserve Bank of Dallas
Published: 1999
Place of publication: [Dallas, Tx.]
Language: eng
Format: Electronic resource
Subjects: Seigniorage (Finance)
Description: "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"--Federal Reserve Bank of Dallas web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/27/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.