Financing the Deficit of the State Budget by National Bank of Georgia (1996-1999)

28 Pages Posted: 10 Aug 2009 Last revised: 18 Sep 2009

See all articles by Jacek Cukrowski

Jacek Cukrowski

CASE - Center for Social and Economic Research

Date Written: 2000

Abstract

In this paper the concept of total gross seigniorage is used to analyze sources of revenues of National Bank of Georgia (NBG) and their distribution in the period 1996-1999. A comprehensive framework for measuring total seigniorage and its main components is presented and estimates of seigniorage revenues (sources and uses) are computed and analyzed. It is shown that in the considered period fiscal revenues from NBG have not been extensively financed by the money supply (consequently, cannot be estimated by the monetary seigniorage), but have been mostly covered by the reduction of the non government debt hold by central bank. Since the stock of international and private domestic assets hold by National Bank of Georgia is limited, in long run NBG cannot rely on it. The only way how, in the future, NBG can finance large deficits of the state budget is to use monetary seigniorage. This, however, will have to be accompanied by significant growth of monetary base and will cause a danger of large inflation.

Keywords: Georgia, deficit

Suggested Citation

Cukrowski, Jacek, Financing the Deficit of the State Budget by National Bank of Georgia (1996-1999) (2000). CASE Network Studies and Analyses No. 215. Available at SSRN: https://ssrn.com/abstract=1445376 or http://dx.doi.org/10.2139/ssrn.1445376

Jacek Cukrowski (Contact Author)

CASE - Center for Social and Economic Research ( email )

Center for Social and Economic Research,
Warsaw
Poland

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