The Comparison between the Welfare Cost of Seignorage Tax and Consumption Tax: The CIA Approach Iran Case Study

Shafieizadeh, Mina; Dallali Esfahani, Rahim; Vaez Barazani, Mohammad

doi:10.22075/jem.2017.1510

The Comparison between the Welfare Cost of Seignorage Tax and Consumption Tax: The CIA Approach Iran Case Study

Authors

Mina Shafieizadeh ¹

Rahim Dallali Esfahani ²

mohammad vaez barazani ³

¹ Ph.D. Student in Economics, Department of Economics, University of Semnan

² Professor in Economics, Department of Economics, University of Esfahan

³ Associate Professor in Economics, Department of Economics, University of Esfahan

10.22075/jem.2017.1510

Abstract

This study using the CIA model to compare the welfare cost of seigniorage tax and consumption tax for the Iranian economy. Therefore, after a brief discussion of the CIA model is a perfect representation of the model. Finally, the model is calibrated for the economy and the results of the calibration is the following:

In the short-term and emergency situation the government needs to finance its budget deficit, welfare cost of finance through seigniorage tax less than the cost of finance welfare through consumption taxes. Long-term and stable situation, seigniorage tax replacement strategy rather than consumption taxes impose costs on society's welfare.

Keywords

Welfare cost

Seigniorage Tax

Consumption Tax

Cash in Advanced Approach