Abstract
Usually regarded as a financial advantage enjoyed by the issuers of the currency, seigniorage is the difference between the nominal value of the currency sign and the cost of its production and distribution. Historically, it took the form of the deterioration of the intrinsic value of coinage from its official value. Sometimes exceptional, revenues from this operation allow the government to finance its spending without raising new taxes. In modern economies, in the absence of deep financial markets, the state has recourse to money creation to finance its deficit. In this regard, the article proposes to evaluate the experience of two countries that have negotiated differently the process of financial liberalization: Turkey and Tunisia.
Highlights
Work examined the inflationary financing from the viewpoint of the cost of welfare in relation to alternative means of financing the deficit. Olivera (1967) suggests that inflation-induced seigniorage may lower real income tax, Aghevli (1977) made a cost benefit analysis and showed that in developing countries, development programs can be financed by the inflation tax because of the inefficiency of the tax system
De Haan & Zelhorst & Roukens (1993) implement different approaches that attempt to analyze the tax inflationary theory of maximization of government revenue, optimal taxation and fiscal dominance hypothesis. Empirical work as those of Sargent (1982), Dornbush & Fischer (1986), Von Wijnbergen (1989), Buiter (1990) and Easterly and Schmidt-Hebel (1996) try to show a common approach among economists: inflation is often caused by the need of increasing the seigniorage of the government to finance the high public deficit
1) In Turkey, seigniorage, in the monetary sense of the term, has a greater weight than previously imagined until the end of 2001, when the Central Bank gained autonomy
Summary
Turkish economy was characterized by high inflation rates This erosion in the relative price of the currency was largely explained by the financing of the deficit by money creation (Akçay and al., 1996), Metin, 1998 and Günaydin, 2004). As that debt has become a source of funding for the State, the share of interest payments has become increasingly important in the GNP and expenditure It is only the application of an anti-inflationary policy after 1999 to acquire a primary surplus (budget excluding interest) that the share of deficit in the Gross Domestic Product (GDP) began to decline. Sakal (2002) argues that political uncertainty is the main cause of the increase in the deficit This uncertainty has had a negative effect on economic policies, investments, costs and competitiveness. - A restrictive fiscal policy that concentrates on the current expenditure at the expense of capital expenditure
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