The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Financial integration is likely to entail EEC-wide convergence in both inflation rates and bank reserve requirements, thereby lowering some governments’ seignorage revenues. These revenue losses, however, may be offset by concomitant effects on exchange rate expectations and on interest rates on publicly held government debt. In Italy, the high stock of such debt in relation to base money implies that, to offset the loss of seignorage, it will take only about a 1/2-percentage-point decline in real interest rates. A decline of this magnitude seems feasible, provided that there is credible action to place the public debt on a sustainable path.