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Liberalisation and Seigniorage revenue in Kenya, Ghana and Tanzania

Author

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  • Christopher Adam
  • Benno Ndulu
  • Nii Sowa
Abstract
This article examines the implications for seigniorage revenue of exchange rate and asset market liberalisation. It is argued that liberalisation lowers the average and marginal seigniorage capacity of governments by increasing the elasticity of substitution between base money and other financial assets. Moreover, to the extent that exchange rate liberalisation eliminates goods market rationing, it simultaneously reduces the return to holding precautionary and speculative money balances. The implication is that countries that have relied on seigniorage revenue need to undertake deeper‐than‐anticipated fiscal adjustment in order to maintain macroeconomic balance following liberalisation programmes. The article uses error‐correction estimates of the demand for base money to derive the long‐run revenue maximising rate of inflation for the three economies and to assess the revenue implications of the sluggish adjustment of money demand in response to short‐term monetary shocks.

Suggested Citation

  • Christopher Adam & Benno Ndulu & Nii Sowa, 1996. "Liberalisation and Seigniorage revenue in Kenya, Ghana and Tanzania," Journal of Development Studies, Taylor & Francis Journals, vol. 32(4), pages 531-553.
    • Handle: RePEc:taf:jdevst:v:32:y:1996:i:4:p:531-553
    DOI: 10.1080/00220389608422427
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    Citations

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    Cited by:

    1. Prof.Dr. Cevat GERNI & Doc.Dr. O. Selcuk EMSEN & Dr. M. Kemal DEGER, 2005. "Erken Uyari Sistemlerý Yoluyla Turkiye’Deki Ekonomik Krizlerin Analizi," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 2(1), pages 39-62, November.
    2. Benno J. Ndulu & Stephen A. O'Connell, 1999. "Governance and Growth in Sub-Saharan Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 41-66, Summer.
    3. Xavier Debrun & Paul Masson & Catherine Pattillo, 2005. "Monetary union in West Africa: who might gain, who might lose, and why?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(2), pages 454-481, May.
    4. Mete Feridun, 2005. "Impact of Monetary Policy on Economic Instability in Turkey (1983 - 2003)," Prague Economic Papers, Prague University of Economics and Business, vol. 2005(2), pages 171-179.
    5. Michaël GOUJON & Sylviane GUILLAUMONT JEANNENEY & Christopher ADAM, 2002. "Currency substitution and the transactions demand for money in Vietnam," Working Papers 200228, CERDI.
    6. Paul Masson & Catherine Pattillo, 2002. "Monetary Union in West Africa: An Agency of Restraint for Fiscal Policies?," Journal of African Economies, Centre for the Study of African Economies, vol. 11(3), pages 387-412, September.
    7. Christopher Adam & Michael Goujon & Sylviane Guillaumont Jeanneney, 2004. "The transactions demand for money in the presence of currency substitution: evidence from Vietnam," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1461-1470.
    8. Agbonyitor, Albert D. K., 1998. "Development expenditures and the local financing constraint," Policy Research Working Paper Series 1907, The World Bank.
    9. Nii K. Sowa & Ivy K. Acquaye, 1999. "Financial and foreign exchange markets liberalization in Ghana," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(3), pages 385-409.
    10. Kaufmann, Daniel & O'Connell, Stephen, 1996. "The Macroeconomics Of Delayed Exchange Rate Unification: Theory And Evidence From Tanzania," Harvard Institute for International Development (HIID) Papers 294377, Harvard University, Kennedy School of Government.
    11. Michaël GOUJON & Sylviane GUILLAUMONT JEANNENEY & Christopher ADAM, 2003. "Currency substitution and the transactions demand for money," Working Papers 200304, CERDI.
    12. Levent, Korap, 2006. "Seigniorage revenue and Turkish economy," MPRA Paper 20106, University Library of Munich, Germany.

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