Seigniorage Revenue and Inflation Tax: Testing Optimal Seigniorage Theory for Turkish Economy

dogru, bulent (2013): Seigniorage Revenue and Inflation Tax: Testing Optimal Seigniorage Theory for Turkish Economy. Published in: International Journal of Economics and Finance , Vol. 6, No. 5 (June 2013): pp. 122-133.

Abstract

The goal of this study is to test the implication of Mankiv’s (1987) optimal seigniorage theory suggesting that in the long run higher tax rates are associated with higher inflation rates and higher nominal interest rates for Turkish Economy using time series dataset for the time period 1980-2011.We examine the long run relationship between nominal interest rates, inflation and tax revenue. For this purpose, we estimate the Mankiw’soptimal seigniorage model for Turkish Economy with the cointegration and vector error correction methods (VECM) techniques. According to econometric result, in long run there is a causality relationship from inflation and tax revenue to nominal interest rates. However, in short run we could not find any evidence that support the causality from inflation and tax revenue to nominal interest rates

• Item Type: MPRA Paper
• Language: English
• Keywords: seigniorage and inflation tax, optimal seigniorage theory, Turkish economy, error correction model, cointegration analysis
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy

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