How to Cut the Seigniorage Cake in an Enlarged EMU

This paper analyses the distribution of seigniorage in an enlarged European Monetary Union (EMU) when the new EU member countries from Central and Eastern Europe adopt the euro. In principle each country of a monetary union contributes to seigniorage in proportion to the country’s demand for base money. However, the actual distribution of seigniorage by the European Central Bank is made in accordance with a specific distribution key, whose components are the respective GDP and population proportions of the individual member countries. Applying this distribution formula, we calculate the weights for the member countries of an enlarged EMU. Pointing to specific features for the countries in Central and Eastern Europe the paper addresses the question whether the new member countries get back the seigiorage that they generated. JEL classification: E58; F33; F36