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Riccardo Rovelli - One of the best experts on this subject based on the ideXlab platform.
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the generation and distribution of central bank Seigniorage in the czech republic hungary and poland
PSL Quarterly Review, 2002Co-Authors: Eduard Hochreiter, Riccardo RovelliAbstract:We measure the amount of central bank Seigniorage generated in three economies in transition and inquire to what extent Seigniorage ultimately accrues to the government. We relate our findings to the institutional environment of the three countries. We find that, in parallel to the process of disinflation, Seigniorage has declined substantially in the 1990s in all three countries under consideration pointing to more monetary discipline and a strengthening of central bank independence. Only in Hungary Seigniorage benefited the government to a significant amount. We interpret this as being the consequence of past policies, rather than an obstacle to further disinflation. JEL Codes: E58, P24, E31, E52, P21, P34, P35
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the generation and distribution of central bank Seigniorage in the czech republic hungary and poland
Social Science Research Network, 1999Co-Authors: Eduard Hochreiter, Riccardo RovelliAbstract:We measure the amount of central bank Seigniorage generated in three economies in transition, and inquire to what extent Seigniorage ultimately accrues to the government. We relate our findings to the institutional environment of the three countries. In particular we document that, in parallel to the process of disinflation, Seigniorage has declined in the period 1992-1997 in both Hungary and Poland. On the other hand it slightly increased in the Czech Republic, even if this country has experienced a steeper path of disinflation. Only in Hungary Seigniorage benefits the government in a significant amount.
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Central banks and Seigniorage: A study of three economies in transition
European Economic Review, 1996Co-Authors: Eduard Hochreiter, Riccardo Rovelli, Georg WincklerAbstract:Abstract The paper examines the relations between central banks and other macro sectors in the Czech Republic, Hungary, Romania, with respect to the creation and distribution of Seigniorage, taking Austria and Germany as a reference. In economies in transition, transfers of Seigniorage from the central bank to the government and to the banking sector may appear as a natural way to soften the financial constraints of both sectors. We propose a simple framework for the analysis of central bank Seigniorage, based on the opportunity cost approach, and measure both the amount and allocation of Seigniorage for the five countries in 1993. We find central bank Seigniorage to be approximately four times our benchmark value in Hungary, and thirty times in Romania (the latter due to the high level of the inflation tax). In Hungary and Romania most Seigniorage is appropriated (as an interest rate subsidy) by the government; in Romania a large part also goes as a subsidy to the financial sector. In none of the five countries we find that central banks retain an excessive amount of Seigniorage for reserve accumulation or for current expenditures. In the last part of the paper we discuss the implications of our findings on Seigniorage for the evaluation of central bank independence vis-a-vis the government.
Jorg Bibow - One of the best experts on this subject based on the ideXlab platform.
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unconventional monetary policies and central bank profits Seigniorage as fiscal revenue in the aftermath of the global financial crisis
Social Science Research Network, 2018Co-Authors: Jorg BibowAbstract:This study investigates the evolution of central bank profits as fiscal revenue (or: Seigniorage) before and in the aftermath of the global financial crisis of 2008–9, focusing on a select group of central banks—namely the Bank of England, the United States Federal Reserve System, the Bank of Japan, the Swiss National Bank, the European Central Bank, and the Eurosystem (specifically Deutsche Bundesbank, Banca d’Italia, and Banco de Espana)—and the impact of experimental monetary policies on central bank profits, profit distributions, and financial buffers, and the outlook for these measures going forward as monetary policies are seeing their gradual “normalization.” Seigniorage exposes the connections between currency issuance and public finances, and between monetary and fiscal policies. Central banks’ financial independence rests on Seigniorage, and in normal times Seigniorage largely derives from the note issue supplemented by “own” resources. Essentially, the central bank’s income-earning assets represent fiscal wealth, a national treasure hoard that supports its central banking functionality. This analysis sheds new light on the interdependencies between monetary and fiscal policies. Just as the size and composition of central bank balance sheets experienced huge changes in the context of experimental monetary policies, this study’s findings also indicate significant changes regarding central banks’ profits, profit distributions, and financial buffers in the aftermath of the crisis, with considerable cross-country variation.
Guido Tabellini - One of the best experts on this subject based on the ideXlab platform.
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Seigniorage and political instability
The American Economic Review, 1992Co-Authors: Alex Cukierman, Sebastian Edwards, Guido TabelliniAbstract:The importance of Seigniorage relative to other sources of government revenue differs markedly across countries. This paper tries to explain this regularity by studying a political model of tax reform. The model implies that countries with a more unstable and polarized political system will have more inefficient tax structures and, thus, will rely more heavily on Seigniorage. This prediction of the model is tested on cross-sectional data for seventy countries. The authors find that, after controlling for other variables, political instability is positively associated with Seigniorage. Copyright 1992 by American Economic Association.
Daniel Gros - One of the best experts on this subject based on the ideXlab platform.
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negative rates and Seigniorage turning the central bank business model upside down the special case of the ecb ceps policy brief no 344 july 2016
2016Co-Authors: Daniel GrosAbstract:Negative rates have invalidated the normal business model of central banks, which consists of issuing zero-interest bearing cash as liabilities and earning a return on their assets (the resulting profits are called “Seigniorage”). But many central banks are now earning a negative rate on their assets. Seigniorage, in fact, might now become negative in the euro area and in Japan. Bond purchasing programmes (called usually QE for quantitative easing) offer central banks at least temporary profit opportunities since they can issue liabilities at lower rates than the long-term bonds they acquire. The resulting profits should be regarded in the same way as those of investment banks. For the time being, central banks are making large profits on their investment banking activities, but little in terms of traditional Seigniorage. The QE programme of the European Central Bank does not increase its Seigniorage revenues, because 80% of the euro area’s sovereign bond purchase programme is done by the national central banks on their own accounts. The policy implication of this assessment is that the Seigniorage income of the ECB will be much smaller than many assume and one should thus not count on it as a source for any euro-area projects.
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profiting from the euro Seigniorage gains from euro area accession
Journal of Common Market Studies, 2004Co-Authors: Daniel GrosAbstract:This article puts forward a methodology to assess the fiscal implications for the new EU members from central and eastern Europe (CEECs) of joining the euro area. An application of this methodology under a specific set of conditions shows that the rules of the ECB on the distribution of Seigniorage favour poorer countries so that one would expect the new member countries to benefit from participating in the distribution of the profits of the ECB. For two countries the gains could indeed be sizeable, initially almost 1 per cent of GDP, per annum. But for others the gains are more modest. Two factors have tended to reduce the expected financial gains for the new Member States: firstly, since the introduction of the euro, cash use has fallen considerably in the euro area; and secondly, some of the new CEEC members have in general much higher cash-to-GDP ratios and therefore earn, for the time being, relatively high domestic Seigniorage revenues. Illustrative calculations show that, in present value terms, the gains could reach up to 10 per cent of GDP for poorer countries that catch up only slowly to the EU average. But countries that enter with a GDP per capita above about one-half of the EU average might actually lose if initially their cash ratios are much above the euro area value.
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open issues in european central banking
2000Co-Authors: Lorenzo Bini Smaghi, Daniel GrosAbstract:Introduction WHO IS IN CHARGE OF THE EUROSYSTEM? Introduction The Decision-Making Process What the Treaty States (and What it doesn't State) The Balance of Power The Risks of a Weak ECB Implementation The Interpretation of the Treaty The Underlying Reasons for Decentralization The Consequences of Decentralization Is Decentralization Sustainable? WHO TAKES CARE OF FINANCIAL STABILITY IN EUROPE? Introduction Preventing Financial Crises The Instruments Financial Regulation in the EU Prudential Supervision Financial Crisis Management Solvency and Liquidity Crises Bailing out Banks in Monetary Union The Lender-of-the-last-resort in Monetary Union Who (in the Eurosystem) should Lend in the Last Resort? Should the Eurosystem be Granted Supervisory Powers? Conclusions Annex: Does Prudential Supervision Interfere with Monetary Policy? ARE EUROPEAN CENTRAL BANKS OVER-CAPITALIZED? Introduction The Eurosystem and its Components A Comparative G-3 Perspective The Liability Side and Overall Size: a Comparison with the US and Japan The Composition of the Asset Side: Foreign Exchange Assets Cleaning the Eurosystem Balance Sheet A Lean Balance Sheet Conclusions WHO GETS THE Seigniorage? Introduction What is Seigniorage? The Treaty's Provisions The Problems The Agreed Non-Solution Alternative Approaches to Phasing-in Conclusions Annex: Legal Issues Annex: The Distribution of Seigniorage in the Context of the Fiscal Constitution of the EU HOW CAN THE EUROSYSTEM BECOME (AND REMAIN) INDEPENDENT? Introduction The Independence Provided by the Treaty Statutory Independence Functional Independence Economic Independence Personal Independence Measuring the ECB's Independence Against that of Other Central Banks The Limits of Measurement The Potential Threats to the ECB's Independence The Exchange Rate Regime The NCBs' Activities 'Outside' the ESCB Conclusions ... AND ACCOUNTABLE? Introduction Democratic Control, Independence and Accountability The Economics of Central Bank Accountability How to Assess Central Bank Accountability? How Accountable is the ECB? Conclusions CONCRETE PROPOSALS FOR STRENGTHENING THE EUROSYSTEM Introduction Transform the Eurosystem into a True European Central Bank Clarify the Responsibility for Financial Stability Clarify Financial Relationships within the Eurosystem Annexes Tables Figures
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distributing Seigniorage under emu
ifo Schnelldienst, 1998Co-Authors: Daniel GrosAbstract:Der Euro kommt punktlich am 1. Januar 1999, das Eurogeld 2002. Ein Geld fur Europa, eine Europaische Zentralbank. Die Geldschopfung selbst, d.h. die Ausgabe der Wahrung, und der damit verbundene Geldschopfungsgewinn (Seigniorage) verbleiben jedoch bei den einzelnen nationalen Notenbanken. Und daran hat sich bereits ein Streit entzundet, weil z.B. Deutschland einen groseren Anteil der gesamten EWU-Geldschopfung produziert, aber nach einer Verteilungsformel des Systems der Europaischen Zentralbanken einen geringeren Teil der gesamten Geldschopfungsgewinne erhalten soll, wahrend andere Lander umgekehrt von dieser Verteilung profitieren. Der Autor Daniel Gros, stellvertretender Direktor des Centre for European Studies in Brussel, schlagt in seinem Beitrag eine Alternative fur die Seigniorage vor, die ab 2002 in der EWU entsteht.
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Seigniorage and emu the fiscal implications of price stability and financial market integration
Journal of Common Market Studies, 1995Co-Authors: Daniel GrosAbstract:Disinflation, especially if coupled with financial market liberalization, has implications for public finances because it lowers the revenue from Seigniorage. There might thus be a trade-off between the criteria on inflation convergence and public finances that were set at Maastricht. This article measures the effects of lower inflation and financial market integration on the revenue from Seigniorage for the EU Member States that have in the past relied most heavily on this source of revenues. We find that, except for Greece, Seigniorage considerations should no longer be a factor in discussions about EMU.
Francisco Veiga - One of the best experts on this subject based on the ideXlab platform.
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the political economy of Seigniorage
Journal of Development Economics, 2008Co-Authors: Ari Aisen, Francisco VeigaAbstract:While most economists agree that Seigniorage is one way governments finance deficits, there is less agreement about the political, institutional and economic reasons for relying on it. This paper investigates the main political and institutional determinants of Seigniorage using panel data on about 100 countries, for the period 1960–1999. Estimates show that greater political instability leads to higher Seigniorage, especially in developing, less democratic and socially-polarized countries, with high inflation, low access to domestic and external debt financing and with higher turnover of central bank presidents. One important policy implication of this study is the need to develop institutions conducive to greater political stability as a means to reduce the reliance on Seigniorage financing of public deficits.
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the political economy of Seigniorage
Research Papers in Economics, 2005Co-Authors: Ari Aisen, Francisco VeigaAbstract:While most economists agree that Seigniorage is one way governments finance deficits, there is less agreement about the political, institutional and economic reasons for relying on it. This paper investigates the main determinants of Seigniorage using panel data on about 100 countries, for the period 1960-1999. Estimates show that greater political instability leads to higher Seigniorage, especially in developing, less democratic and socially-polarized countries, with high inflation, low access to domestic and external debt financing and with higher turnover of central bank presidents. One important policy implication of study is the need to develop institutions conducive to greater economic freedom as a means to lower the reliance on Seigniorage financing of public deficits. Classification-JEL: E31, E63.
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the political economy of Seigniorage
IMF Working Papers, 2005Co-Authors: Ari Aisen, Francisco VeigaAbstract:While most economists agree that Seigniorage is one way governments finance deficits, there is less agreement about the political, institutional, and economic reasons for relying on it. This paper investigates the main determinants of Seigniorage using panel data on about 100 countries, for the period 1960-1999. Estimates show that greater political instability leads to higher Seigniorage, especially in developing, less democratic, and socially polarized countries, with high inflation, low access to domestic and external debt financing and with higher turnover of central bank presidents. One important policy implication of this study is the need to develop institutions conducive to greater economic freedom as a means to lower the reliance on Seigniorage financing of public deficits.
