FINANCIAL REPRESSION, MONEY GROWTH, AND SEIGNORAGE - THE POLISH EXPERIENCE

A small analytical framework is developed to analyze the relation betw een reserve requirements, base money growth and seignorage revenues. F rom the analysis, the authors can derive of steady-state seignorage re venues as a function of the rate of money growth and the intensity of financial repression. The framework is applied to the case of Poland t hat has undertaken a rapid transition to a market economy and implemen ted a substantial financial sector reform. The process of financial se ctor reform in Poland is discussed and estimates of the currency deman d and deposit demand functions are undertaken to derive the seignorage Laffer curve.