• ISSN: 2010-023X (Print)
    • Abbreviated Title: Int. J. Trade, Economics and Financ.
    • Frequency: Quaterly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Managing Editor: Ms. Shira. W. Lu
    • Abstracting/ Indexing:  Crossref, Electronic Journals Library , EBSCO
    • E-mail: ijtef.editorial.office@gmail.com
IJTEF 2014 Vol.5(3): 259-262 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2014.V5.381

Testing Optimal Seigniorage Theory in Taiwan, 1965-2012

Ming-Hung Yao and Shiou-Yen Chu

Abstract—The optimal collection of taxes and seigniorage is an important issue in public finance. For developing and emerging countries, seigniorage is particularly essential to provide an additional source for government revenue. Barro (1979) and Mankiw(1987) propose tax-smoothing and revenue-smoothing hypotheses to discuss how the government should optimally collect taxes. This paper aims to test the taxand revenue-smoothing hypotheses with Taiwaneseannual data from 1965 to 2012. Unit root tests and Johansen’s cointegration technique are employed. Our results indicate that Taiwanese data are in favor of these two hypotheses. The government may have used seignorage as a supplement to raise tax revenue. Moreover, both fiscal policy and monetary policy are implemented in an optimal fashion to finance government expenditure.

Index Terms—Cointegration analysis, optimal seigniorage theory, tax smoothing, revenue smoothing.

Ming-Hung Yao is with the Department of Wealth and Taxation Management, National Kaohsiung University of Applied Sciences, 80778 Taiwan (e-mail: mhyao@kuas.edu.tw).
Shiou-Yen Chu is with the Department of Economics, National Chung Cheng University, 62102 Taiwan (e-mail: ecdsyc@ccu.edu.tw).

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Cite: Ming-Hung Yao and Shiou-Yen Chu, "Testing Optimal Seigniorage Theory in Taiwan, 1965-2012," International Journal of Trade, Economics and Finance vol.5, no.3, pp. 259-262, 2014.

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