Working Paper: CEPR ID: DP3156
Authors: Andreas M. Fischer; Thomas Jordan; Caeser P. Lack
Abstract: The monetary debate in Switzerland about joining the European Monetary Union (EMU) has primarily focused on the gains in terms of transaction costs and lower uncertainty from using a common currency versus the sacrifice of giving up an independent monetary policy. This Paper considers an additional factor in this debate, namely the decrease of seigniorage for Switzerland in the case of joining EMU. Our calculations reveal that this loss of revenues is not trivial. Swiss currency holdings per capita are among the largest in the world. They are estimated to be 5'000 Swiss francs per capita in 2002. If Switzerland joined EMU at that time, about half of the seigniorage stemming from the previous Swiss franc currency circulation would be redistributed among the EMU member countries in the worst case. Our results indicate that Switzerland would be the third largest contributor of seigniorage in absolute terms after Germany and Spain. In relative terms, the Swiss per capita contribution would be more than four times as high as the German contribution.
Keywords: seigniorage; Swiss National Bank; EMU
JEL Codes: E58; E62; H22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Switzerland joining the EMU (F36) | loss of seigniorage revenue (H69) |
| Switzerland joining the EMU (F36) | redistribution of seigniorage among EMU member countries (F36) |
| Switzerland's contribution to seigniorage (H87) | third largest in absolute terms (F69) |
| loss of seigniorage revenue (H69) | disproportionately affect cantonal governments (H70) |
| Switzerland joining the EMU (F36) | per capita loss of approximately 1,743 euros (J17) |