(2) In the 1890s, the Imperial Treasury rejected compromise proposals to allow the British West Indian and British West African colonies to share in the seigniorage
profits arising from their use of British coin (Rowan 1954, pp.
is essentially a tax on every dollar accepted anywhere as an interest-free loan to the Treasury.
Yet another factor that plays into future cost savings is seigniorage
revenue, which comes from the difference between the face value of a coin or note and its production costs (See the sidebar).
The difference between the face value of coins and the costs of minting them results in earnings, called seigniorage
, which is shown in the budget as a reduction in needed borrowing for the government, after the deficit or surplus for the year is calculated.
At "feudal mints" in the Middle Ages and later at locally "patented" mints, citizens were charged a percentage fee, called "seigniorage
," for the assaying and imprinting of gold and silver.
That's because of what's called seigniorage
- the difference between what it costs to produce an item of currency and its face value.
The inflation-prone countries would gain from greater financial discipline because the revenue from 'seigniorage
In addition to revenue losses and higher debt servicing costs, many of the emerging market economies in our core sample--particularly the group with a default history--had traditionally relied on revenue from seigniorage
to finance a nontrivial fraction of their fiscal deficits.
Another study considers a model where countries with a more unstable and polarised political system have more inefficient tax structures and, thus, rely more heavily on seigniorage
(Cukierman, Edwards and Tabellini, 1992).
Finally, in Part III, they introduce fiscal policy to study how deficits, the national debt, open market operations and seigniorage
affect the functioning of the economy.
government earns approximately $25 billion annually in seigniorage
, approximately 1.5% of total revenue.
What might worry a central bank the most, especially if the substitution is substantial, is the loss of "seigniorage
."(8) If the adoption of e-money was extensive enough, the loss of seigniorage
could become a concern to central banks, which may become more dependent on other sources of revenue.