The Optimal Collection of Seigniorage: Theory and Evidence

27 Pages Posted: 16 Jul 2004 Last revised: 16 Sep 2022

See all articles by N. Gregory Mankiw

N. Gregory Mankiw

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 1987

Abstract

This paper presents and tests a positive theory of monetary and fiscal policy. The government chooses the rates of taxation and inflation to minimize the present value of the social cost of raising revenue given exogenous expenditure and an intertemporal budget constraint. The theory implies that nominal interest rates and inflation are random walks. It also implies that nominal interest rates and inflation move together with tax rates. United States data from 1952 to 1985 provide some support for the theory.

Suggested Citation

Mankiw, N. Gregory, The Optimal Collection of Seigniorage: Theory and Evidence (May 1987). NBER Working Paper No. w2270, Available at SSRN: https://ssrn.com/abstract=227506

N. Gregory Mankiw (Contact Author)

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