SEIGNIORAGE AND EMU - THE FISCAL IMPLICATIONS OF PRICE STABILITY AND FINANCIAL MARKET INTEGRATION

Disinflation, especially if coupled with financial market liberalizati on, has implications for public finances because it lowers the revenue from seigniorage. There might thus be a trade-off between the criteri a on inflation convergence and public finances that were set at Maastr icht. This article measures the effects of lower inflation and financi al market integration on the revenue from seigniorage for the EU Membe r States that have in the past relied most heavily on this source of r evenues. We find that, except for Greece, seigniorage considerations s hould no longer be a factor in discussions about EMU.