A Study on the Seigniorage Tax and Inflation in Taiwan

• Main Authors: Ji-Yi Mo, 莫積懿
• Other Authors: 謝德宗
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/84609748836662501768

碩士 === 國立臺灣大學 === 經濟學研究所 === 100 === The outstanding deficit account of the Taiwanese governmental debts has accumulated and approached to its legal limit in the recent years. On the other hand, the Central Bank plays a role as a major contributor to the governmental treasury each year. In fact, the revenue of the Central Bank is far higher than its submitted amount. The governmental deficit can be compensated by the revenue of the Central Bank, which is imposed by seigniorage. But defraying the governmental expenditure by the revenue of the Central Bank may ignite inflation. If the Central Bank plans to maximize its seigniorage, the inflation rate should be controlled within a range so as to avoid a hyper- inflation. In this thesis a real money demand function is built with the cash-in-advance model. With this function a long-term relation can be derived that in Taiwan a 1% GDP rise leads to a 2.239789% rise of money demand. Furthermore, the semi-elastic coefficient of inflation rate to money demand is -7.495275, that is in a society with a higher inflation rate the demand for money is lesser. This research uses data acquired from the websites of the ROC macro statistic data bases of the national statistic bureau, the Ministry of the Interior, and the Central Bank, covering a period from 1961 to 2010. The series stability is proved by the ADF test. The long term stable relation of money growth rate, inflation rate and economic growth rate is also confirmed by the cointegration test. From the comparison of the Taiwan seiginorage to the deficit to GDP ratio, it shows a certain level of reversed relation and reveals the compensation effect of the revenue of the Central Bank toward deficit. Furthermore for achieving the maximum effect of seigniorage, the money growth rate should be in the range from 16.6531% to 27.0317%, and the maximum inflation rate should be kept below 15.7122% (2009). If the hyperinflation can be controlled, it seems that the seigniorage is a measure for the Ministry of Finance to raise its financial resources.