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@article{10843, author = {Mach, Petr}, article_location = {Praha}, article_number = {2}, doi = {http://dx.doi.org/10.52950/ES.2023.12.2.005}, keywords = {Monetary Theory; Monetary Base; Seigniorage; Inflation Tax; Laffer curve}, language = {eng}, issn = {1804-9796}, journal = {International Journal of Economic Sciences}, title = {An error in the theory of seigniorage}, url = {https://eurrec.org/ijoes-article-117068?download=5}, volume = {12}, year = {2023} }
TY - JOUR ID - 10843 AU - Mach, Petr PY - 2023 TI - An error in the theory of seigniorage JF - International Journal of Economic Sciences VL - 12 IS - 2 SP - 83-91 EP - 83-91 PB - EUROPEAN RESEARCH CENTER (EURREC) SN - 18049796 KW - Monetary Theory KW - Monetary Base KW - Seigniorage KW - Inflation Tax KW - Laffer curve UR - https://eurrec.org/ijoes-article-117068?download=5 N2 - The article reveals an error in the theory of seigniorage or government revenue from printing money. Friedman, Cagan, Mankiw, and other economists have repeated the definition of seigniorage as the monetary base multiplied by the rate of inflation (or by the growth in the monetary base). This definition, however, contains a logical error in the formula of seigniorage, confusing the growth rate with the growth rate divided by the growth rate plus one. This often-repeated confusion is consequently common in modern economics textbooks. These many authors have omitted Keynes who – almost one hundred years ago – rightly understood seigniorage to be the monetary base multiplied by the rate of money growth divided by the rate of money growth plus one. This paper presents an unambiguous definition and formula of seigniorage and offers a graphical illustration of seigniorage as a function of monetary growth which corresponds to Keynes’s approach. It is shown that such a graph is an analogy to the Laffer curve in explicit taxation. ER -
MACH, Petr. An error in the theory of seigniorage. \textit{International Journal of Economic Sciences}. Praha: EUROPEAN RESEARCH CENTER (EURREC), 2023, vol.~12, No~2, p.~83-91. ISSN~1804-9796. Available from: https://dx.doi.org/10.52950/ES.2023.12.2.005.
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