| Abstract: | Conclusion Building on Drazen 1985], we have developed a suitable framework for the analysis of the revenue from money and its distribution
between the government and the central bank. In contrast to the accounting system offered by K-N, this framework adopts a
consistent approach with respect to the stock and flow aspects of monetary revenue. Comparing their measure of the government’s
share in monetary revenue with ours, one can conclude that K-N: (i) neglect the stock effects of monetary revenue; (ii) use an incorrect concept of debt in their definition of the government’s revenue; and (iii) mistakenly include a revaluation term in their definition of fiscal seigniorage. After correction for this last factor the
share of the government in total seigniorage rises from 38.3 per cent to 64.8 per cent.
It should be noticed that in the literature often a narrower concept of monetary revenue is used, namely the change in high-powered
money (M). This concept neglects the stock component of the revenue of money (r M) as well as the operating and other costs of the central bank. At first sight, this may seem appropriate if the analysis
concentrates on the tax aspect, i.e. the savings due to money creation, rather than the broader issue of evaluation of the
benefits of the monetary monopoly. This concerns the extensive literature on optimal seigniorage as well as the literature
on the tax-seigniorage trade-off cf. Grilli, 1989]. However, as is clearly pointed out by Klein and Neumann, it is just with
respect to this fiscal aspect of money that the distribution of revenues from money between the central bank and the government
becomes relevant. |
