EVALUATING THE SEIGNORAGE COSTS OF EMU INTEGRATION IN CASE OF ROMANIA

This paper discusses and evaluates the associated cost with the future integration of Romania into EMU, namely the loss of seignorage. The author shows that most of the transitional period the National Bank of Romania has conducted its monetary policy in a hostile economic environment, which did not allow the institution to fulfill its major objective – the reduction of inflation. In this context, the flow of seignorage revenues got each period by the central bank were used for cheap credits, subsidies for public firms and financial support for two state banks. The author also finds that the sources of seignorage for Romania it is the same as in the other transition economies, with monetary seignorage being the main element of revenues. Another result is that there is no strong correlation between seignorage and inflation.