definitions Seigniorage


The difference between what money can buy and its cost of production. Therefore, seigniorage is the benefit that a government or other monetary authority derives from the ability to create money. In international exchange, if one country's money is willingly held by another, the first country derives these seigniorage benefits. This is the case of a reserve currency. The profit to the central bank from money creation; it equals the difference between the cost of issuing the money and the value of the goods and services that money can buy.