№ 9/2016

Fìnansi Ukr. 2016 (9): 65–0

MONETARY POLICY

SHVETS Serhij ¹

¹SI “Institute for Economics and Forecasting of NAS of Ukraine”
OrcID ID : https://orcid.org/0000-0002-3102-9784

Fiscal seigniorage and inflation in Ukraine

The impact of fiscal seigniorage on CPI, as deficit monetization, is discussed in the article. The seigniorage phenomenon is examined from the standpoint of comparing three concepts of estimation: monetary, opportunity cost, and fiscal. It is shown up that seigniorage in percentage of GDP in Ukraine over 2005-2015 had downturn dynamics due to changes in priorities of money issuing objectives alongside the decline in the real sector crediting to the advantage of solving problems of budget deficit financing, and providing operations on the foreign exchange market. The Laffer`s curve plotted for seigniorage, based on Ukraine`s economy as an example, made it possible to estimate the optimal level of consumer price inflation in Ukraine over 2005-2015 on average of 11% (measured correspondingly in the end of the period), which corresponds to the maximum amount of seigniorage revenues. The econometric macro model of fiscal-monetary interaction in Ukraine on a quarterly basis is presented to provide the scenario modeling of CPI dynamics in comparison with the volume of domestic government bonds issuing in 2016. Based on scenario modeling, it is determined that the optimal level of CPI is about 19% (measured correspondingly in the end of the period) given maximum revenues through fiscal seigniorage realized to redeem domestic government bonds of 130 billion UAH by the NBU on the primary stock markets.

Keywords:seigniorage, public debt, fiscal-monetary interaction, inflation, scenario modeling.

JEL: E17, E31, H63, H68.

Shvets S. . Fiscal seigniorage and inflation in Ukraine / S. Shvets // Фінанси України. - 2016. - № 9. - C. 65-0.

Article original in Ukrainian (pp. 65 - 78)

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