Download Free Seigniorage And Inflation Book in PDF and EPUB Free Download. You can read online Seigniorage And Inflation and write the review.

The elasticity of substitution in transactions between money and bonds is a crucial determinant of the seigniorage- maximizing inflation rate and of whether the semi- elasticity of money demand with inflation increases with inflation.
This paper examines the welfare effects of mitigating the costs of inflation. In a simple model where money reduces transaction costs, a fall in the costs of inflation is equivalent to financial innovation. This can be caused by paying interest on deposits, indexing money, or “dollarizing.” Results indicate that financial innovation raises welfare in low inflation economies while reducing it in high inflation economies, due to the offsetting indirect effect of higher inflation to finance the budget.
Governments through the ages have appropriated real resources through the monopoly of the 'coinage'. In modern fiat money economies, the monopoly of the issue of legal tender is generally assigned to an agency of the state, the Central Bank, which may have varying degrees of operational and target independence from the government of the day. In this paper I analyse four different but related concepts, each of which highlights some aspect of the way in which the state acquires command over real resources through its ability to issue fiat money. They are (1) seigniorage (the change in the monetary base), (2) Central Bank revenue (the interest bill saved by the authorities on the outstanding stock of base money liabilities), (3) the inflation tax (the reduction in the real value of the stock of base money due to inflation and (4) the operating profits of the central bank, or the taxes paid by the Central Bank to the Treasury. To understand the relationship between these four concepts, an explicitly intertemporal approach is required, which focuses on the present discounted value of the current and future resource transfers between the private sector and the state. Furthermore, when the Central Bank is operationally independent, it is essential to decompose the familiar consolidated 'government budget constraint' and consolidated 'government intertemporal budget constraint' into the separate accounts and budget constraints of the Central Bank and the Treasury. Only by doing this can we appreciate the financial constraints on the Central Bank's ability to pursue and achieve an inflation target, and the importance of cooperation and coordination between the Treasury and the Central Bank when faced with financial sector crises involving the need for long-term recapitalisation or when confronted with the need to mimick Milton Friedman's helicopter drop of money in an economy faced with a liquidity trap.
It is difficult to give justice to this intriguing book within the confines of a short review. Ernst Juerg Weber, History of Economics Review Coleman s book provides an impressively clear, lively, and intuitive discussion of three of the most important issues in all of monetary economics. I recommend it highly to all readers with an interest in these issues. Peter N. Ireland, Journal of Economic Literature William Coleman s book offers a highly original and insightful discussion of the state of modern monetary theory. Professor Coleman covers difficult issues with a lightness of touch that makes for a very readable discussion. It will benefit students as well as professional economists and policymakers. Kevin Dowd, University of Nottingham, UK This book explores the causes, costs and benefits of inflation. It argues that while the cause of inflation is essentially monetary, the costs and benefits of inflation lie in inflation s distortion of the economy's responses to real shocks. The book begins by securing the Quantity Theory of Money from certain critiques. The theory is defended from the fiscal theory of the price level by a refinement of the theory of money demand, and from post Keynesianism by the construction of a theory of the supply of inside money. To cope with the endogeneity of outside money, a simple and tractable neo-Wicksellian theory of inflation is advanced, which is shown to exhibit a striking homology with the Quantity Theory. The author then traces the costliness of inflation, not to any disturbance of the money market, but to the damage inflation does to the bond market s function of sharing out disturbances to consumption caused by technological shocks. The same damage, however, imparts an egalitarian dynamic to the accumulation of wealth, which will not occur without risky inflation. The Causes, Costs and Compensations of Inflation will be of great interest to policy makers, central bankers, researchers, and both post-graduate and undergraduate students in macroeconomics, money and banking.
This paper derives a reputational equilibrum for inflation in a model in which the government obtains valuable seigniorage by issuing fiat money in echange for real resources. One insightful result is that , with contemporaneous perceptionof actual government behavior and immediate adjustment of real cash balences to new information , the Friedman elasticity solution for maximal seigniorage is the reputatoinal equilibrium. More generally , the analysis shows that the objective of maximal seigniorage produces an equilibrium inflation rate equal either to a generalization of the Friedman elasticity solution or to the rate at which the government discounts future seigniorage adjusted for the growth rate, whichever is larger. Thus, the model formalizes the conjecture that epizodes of inflation rates in excess of the Friedman solution are attributable to high discounts rates for future seigniorage. Adding aversion to high expected inflation to the model, this analysis also rationalizes the observation that inflation rates are usually less than Friedman's elasticity solution.
This book analyzes the revenues from the creation of currency by a central government. Adopting an institutional perspective, it develops a general theory of seigniorage by identifying three monetary regimes in economic history and the history of economic thought: a commodity currency, a fiat currency and a credit currency regime. As such it provides a modern analytical framework to analyze the nature of revenues from the creation of currency and their optimal height, whether currency is issued by means of minting coins, by printing and spending paper notes, by crediting private entities, or combinations thereof. The results of this analysis stretch beyond the immediate topic. The book establishes a relationship between the theory of seigniorage and government debt, the theory of the interest rate, the optimal rate of inflation, or the effectiveness and inflationary limits of outright monetary transactions.