Analysis Study For The Fiscal Effects of Seigniorage In Iraq For The Period (1991-2016) (Testing The Optimal Seigniorage Theory)

Abstract

It is often emphasized that seigniorage financing the  public sector deficits and it is technically a “free lunch” if the economy has not attained the full employment levels. However, conservative macroeconomic policies in many emerging and developing economies, especially in the last two decades, have moved away from seigniorage financing to debt financing the deficits to give greater autonomy to the central banks. Against this backdrop, the paper analyses seigniorage and inflation tax for two period before and after 2003 by constructing a seigniorage laffer curve, and then testing the optimal seigniorage theory in Iraq for same period . So we estimate a seigniorage laffer curve equation before 2003 by using Autoregression Model and after 2003 by  Toda & Yamamoto Model to investigating if a seigniorage-maximizing inflation rate or minimizing it