—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
—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: firstname.lastname@example.org).
Shiou-Yen Chu is with the Department of Economics, National Chung
Cheng University, 62102 Taiwan (e-mail: email@example.com).
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.