Home » Eng Finance » S » Seigniorage


The profits made by a ruler from issuing money, or ‘inflation tax’. Originally this referred to the profits from the issue of coinage with a face value greater than its cost of production. Nowadays seigniorage refers to the ability of governments to obtain goods and services in return for newly created money. A growing economy needs some extra money, but if governments issue too much this produces inflation, which reduces the real purchasing power of the money they have already issued.

Reference: Oxford Press Dictonary of Economics, 5th edt.