Seigniorage Revenue or Consumer Revenue? Theoretical and Empirical Evidences

The purpose of this paper is to propose a seigniorage model including the contributions of Bailey (1956) and Marty (1976), using a different framework to Mankiw (1987), to test whether their results are supported, and use a numerical example to estimate the seigniorage model. The government decides the money growth rate to maximize the social welfare function for each of seigniorage revenue aversion, loving and neutrality. The numerical example using Japanese data shows that the social welfare function supports seigniorage revenue aversion, supporting the results of Bailey and Marty, and that the degree of seigniorage revenue aversion is stronger in the 2000s than in the 1990s.