Abstract:
There are two sources for governments to raise their revenues. The first is the direct taxation levied on output, and the second is seigniorage. Seigniorage is also known as printing new money and is defined as the value of real resources acquired by the government through its power of sovereignty on its monopoly of printing money. The purpose of this paper is to examine the Laffer curve for Seigniorage in the economy of Iran through data-set collected from the statistical books of the central bank of Iran related to the time period 1979-2010. For this purpose, we use a methodology that is based on the Fuzzy C-Means algorithm that is widely used in the context of pattern recognition, and the Takagi-Sugeno approach which is proper for modeling fuzzy systems. This methodology is exceptionally flexible and provides a computationally tractable method of
dealing with non-linear models in high dimensions. Our findings support a standard Laffer curve shape in Iran. In other words, it will be concluded through empirical results that there is a nonlinear relationship between seigniorage and inflation for the economy of Iran in the time period studied in this paper.
Machine summary:
"Estimation of Seigniorage Laffer curve in IRAN: A Fuzzy C-Means Clustering Framework Erfani, Alireza and Safari, Solmaz 1 Received: 12/1/2014 Approved: 5/24/2015 Abstract There are two sources for governments to raise their revenues.
Then, in this paper we investigate the Laffer curve relationship between seigniorage revenue and inflation rate for the economy of Iran by using time series data-set for the time period 1979-2010.
3. The step 2 generates c sets of parameter estimations that are combined by using the membership values as the weights, to model the conditional mean of the dependent variable as follows: c c sk=[Ƹ(bio+bi1pk)uik]/[Ƹuik] k=1,…,n (13) i=1 i=1 th Where uik is the degree of membership of the kth value of p in the i Fuzzy cluster, and bimis the least squares estimator of βim obtained using the i‟th, fuzzy partition of the sample.
The researcher in another study by using threshold regression has reported that the inflation rate which causes government to earn the maximum seigniorage revenue is included in range 22-27 in Iran.
Therefore, it could be concluded that for the years in second cluster given in table 1 (right curve in figure 3), the government‟s mean of tax revenues were lower and consequently government has chosen higher inflation level in order to afford its costs and also to gain more seigniorage revenue.
Figure 5 presents the real values for proportion of government‟s seigniorage revenue to GDP in contrast with simulated values obtained through fuzzy approach which its RMS ERROR criterion is described in Table 1."