• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Penpoin

Better knowledge. Sharper Insight.

  • Management
  • Economics
  • Finance
Economics

Seigniorage

Updated on April 12, 2022 · By Ahmad Nasrudin

Seigniorage
You are here: Home / Economics / Seigniorage

Seigniorage is the profit obtained by the government by printing new money within a specified period. Benefits represent the difference between the face value of a currency and the costs of producing it.

Advertisement

At present, the term also refers to the government’s ability to obtain goods and services in return for newly created money.

Seigniorage calculation

Say, the government prints Rp10,000 banknotes. The nominal value of the money is undoubtedly far higher than the paper used to print it. The greater the difference, the higher the profit. It also gets more prominent when it involves a substantial volume of money printing.

We can calculate seigniorage by subtracting the cost of making and distributing money from its market value. If it costs Rp2,000 to produce Rp10,000 in denominations, the seigniorage is Rp8,000.

Paper and electronic money have a higher seigniorage than metal coins, which are more expensive to make.

Implication

Economic growth requires additional money. However, when the government expands too much, this results in inflation. 

High inflation is known as hyperinflation, which is dangerous to the economy. High inflation reduces the real purchasing power of money and reduces confidence over the domestic currency.

Advertisement

Economic Growth and Economic Development: Their Differences and Relationships

Economic growth has a close relationship with economic development. We need economic growth to support

Economic Growth: Factors, Importance, Impacts, How to Measure It

Economic growth refers to an increase in output in an economy over time. It can be short term or long term. In the short

Gini Coefficient: Meaning, Calculation Method, Data, Pros, and Cons

What's it: Gini coefficient is a statistic of economic inequality in a society. It tells you the distribution of income

Advertisement

Needs: Definition, Example, Type

What's it: Needs means requiring something because it is essential. For example, we need food, water, and shelter

Wants: Definition and Examples

What's it: Wants are hopes to have or fulfill something. If we want something, we expect to be able to buy it and

Venture Capital: How It Works, How It Makes Money, Investment Horizon

What's it: Venture capital is capital invested in a new company, startup, or young company, in return for

Leveraged Buyout (LBO): How it Works, Funding Sources, Criteria for Target 

What's it: A leveraged buyout (LBO) is an acquisition with debt relied upon to finance the purchase. This strategy

Primary Sidebar

TOPIC

Accounting and Finance Business and Strategy Financial Statements Human Resources Investment Macroeconomics Marketing Microeconomics Operation

Advertisement

LATEST POST

  • Private Equity Structure and Fee
  • Hedge Funds Strategy: Macro, event-driven, relative value, and equity hedge strategies
  • Leveraged Buyout (LBO): How it Works, Funding Sources, Criteria for Target 
  • Private Equity: Examples, Strategies, Targets, Its Ways To Make Money
  • Economic Growth and Economic Development: Their Differences and Relationships
  • Where Do Comparative Advantages Come From?

MOST POPULAR

  • Political Environment: Meaning, Examples
  • The Role of Business in Society and the Economy
  • Business Size: Definition, Measurement, Classification
  • Government Intervention: Examples, Reasons, and Impacts
  • Span of Control: Importance, Types, Advantages, Disadvantages
  • Trade Restriction: Reasons, Types, and Impacts

Footer

SEARCH

POPULAR

  • Political Environment: Meaning, Examples
  • The Role of Business in Society and the Economy
  • Business Size: Definition, Measurement, Classification
  • Government Intervention: Examples, Reasons, and Impacts
  • Span of Control: Importance, Types, Advantages, Disadvantages

TOPIC

Accounting and Finance Business and Strategy Financial Statements Human Resources Investment Macroeconomics Marketing Microeconomics Operation

Copyright © 2023 · About Us  · Privacy Policy and Disclaimer  ·  Terms of Use  ·  Comment Policy  ·  Contact Us