Seigniorage in the 21st Century: A Study of the Profits from Money Creation in the United Kingdom and Denmark

62 Pages Posted: 21 Feb 2017

See all articles by Ole Bjerg

Ole Bjerg

Copenhagen Business School

Duncan McCann

New Economics Foundation

Laurie Macfarlane

New Economics Foundation

Rasmus Hougaard Nielsen

Copenhagen Business School

Josh Ryan-Collins

New Economics Foundation

Date Written: February 21, 2017

Abstract

This paper develops a new theory of seigniorage suited to modern economies where the majority of money is created not by the state or central bank but by commercial banks and other monetary financial institutions via their lending activity. We identify four different forms of seigniorage that take account of the modern institutional separation between the state, the central bank, commercial banks and the non-bank private sector in terms of their identities as ‘money creators’ and ‘money users’. The new typology differentiates between seigniorage profits arising from interest rate spreads on stocks of created money and profits arising from flows of interest payments on newly created assets. We illustrate our theoretical framework with empirical data on commercial bank seigniorage and related variables in the United Kingdom and the Denmark over the past quarter century.

Keywords: Seigniorage, Money creation, Central banks, Banks, Financial intermediation, Interest rates, Financialization

JEL Classification: E40, E41, E42, E51, E58, G21

Suggested Citation

Bjerg, Ole and McCann, Duncan and Macfarlane, Laurie and Nielsen, Rasmus Hougaard and Ryan-Collins, Josh, Seigniorage in the 21st Century: A Study of the Profits from Money Creation in the United Kingdom and Denmark (February 21, 2017). Available at SSRN: https://ssrn.com/abstract=2921225 or http://dx.doi.org/10.2139/ssrn.2921225

Ole Bjerg (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Duncan McCann

New Economics Foundation

Cinnamon House
6-8 Cole Street
London, SE1 4YH
United Kingdom

Laurie Macfarlane

New Economics Foundation ( email )

Cinnamon House
6-8 Cole Street
London, SE1 4YH
United Kingdom

Rasmus Hougaard Nielsen

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Josh Ryan-Collins

New Economics Foundation ( email )

Cinnamon House
6-8 Cole Street
London, SE1 4YH
United Kingdom

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