An Investigation On The Importance And Determinants Of The Seigniorage In Islamic Republic Of Iran

In public sector econorrucs, government can finance its budget
through money creation (seigniorage) by transferring resources from
private to the public sector. As it has been seen recently, this policy
caused an increase in Intlation and lowered the purchasing power of
money in developing countries. In other words, here intlation
considered as a tax and for this reason this method of financing is called
"Int1ation Tax".
In the present paper the concept of intlation tax and its vanous
definitions and measurements are discussed. Then the inportance of
inflation tax in different countries as well as in Iran are analysed, Factors
de terming the intlation tax in Iran are being identified too.
The results of this study show that the share of intlation tax in
financing government expenditure and budget deficit in Iran has been
increased recently especially in the 1360s decade.
The empirical results of the prcsent paper also conclude that based
on different definitions of inflation tax, for the 1338-1383 period, an
increase in the share of that part of GNP which is casy to tux a nd has a
small collection tax cost lowers the in flationary financing .It also shows
the increase in per capita income and government expenditure leads to
an increase in inflation tax in Iran. Therefore , to alliviate the
unfavorable effects of the inflation tax, government must concentrate in
supplying the public gomL and reform the tax system of the country. so
that Providing conditions for promotion of directly productive activities
(DPA) For private sectors.