In this paper, we consider a government that executes a permanent open market sale. The government is forced to eventually use money creation to pay for the debt's expenses, choosing between changing either the money growth rate (the inflation-tax rate) or the reserve requirement ratio (the...

Producing new money is inexpensive, making seigniorage--the revenues earned from creating new money--attractive. However, the social costs of faster money creation most likely are greater than the production costs. These marginal social costs may put limits on how much real seigniorage revenue...

This article examines the effects and desirability of paying interest on required reserves. Scott Freeman and Joseph Haslag demonstrate that a policy of paying interest on reserves can make everyone better off, even if the interest must be financed by a tax on capital. An essential part of this...

The monetary base is the sum of high-powered money and an adjustment factor that measures changes in reserve requirement ratios. This adjustment factor is calculated so that it responds to changes in deposit levels in addition to changes in reserve requirements. Consequently, researchers and...