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Optimal Seigniorage, the Gold Standard, and Central Bank Financing

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  • Goff, Brian L
  • Toma, Mark

Abstract

This paper extends the theory of optimal seigniorage to allow for money production costs. An important implication is tha t high money production costs, along with a requirement that the monet ary branch of government self-finance its operation, severs the connecti on between the tax rate on output and the tax rate on money. Using U.S. data, the authors find that tax rates on output and money move together only during periods when the government controls both tax rates and there is a close correspondence between revenue produced b y the monetary authority and revenue transferred to the treasury. Copyright 1993 by Ohio State University Press.

Suggested Citation

  • Goff, Brian L & Toma, Mark, 1993. "Optimal Seigniorage, the Gold Standard, and Central Bank Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 79-95, February.
    • Handle: RePEc:mcb:jmoncb:v:25:y:1993:i:1:p:79-95
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    Cited by:

    1. Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234, Elsevier.
    2. Karl‐Friedrich Israel, 2021. "The fiat money illusion: On the cost‐efficiency of modern central banking," The World Economy, Wiley Blackwell, vol. 44(6), pages 1701-1719, June.
    3. Patrick Honohan, 1994. "The Fiscal Approach to Financial Intermediation Policy," Papers WP049, Economic and Social Research Institute (ESRI).
    4. Mark Toma, 1999. "A Positive Model of Reserve Requirements and Interest on Reserves: A Clearinghouse Interpretation of the Federal Reserve System," Southern Economic Journal, John Wiley & Sons, vol. 66(1), pages 101-116, July.
    5. Patrick Honohan, 2003. "Taxation of Financial Intermediation : Theory and Practice for Emerging Economines," World Bank Publications - Books, The World Bank Group, number 15122.
    6. Robert Haney Scott, 1997. "Pegged Exchange Rate Systems in Macau and Hong Kong," Multinational Finance Journal, Multinational Finance Journal, vol. 1(2), pages 153-168, June.

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