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As is well known, seigniorage is the profit a money producer obtains from producing money and putting it into circulation. With regards to coin seignioirage, it is usually calculated as the difference between the face value of coins and the cost to produce and distribute it.

However, in many countries the right to produce coins and banknotes are separated between the central government and an (independent) central bank. Although central banks formally transfer their profits to the government, banknote seigniorage can largely remain at the central bank depending on how banknotes were put into circulation. If the central bank decides to buy government bonds in exchange for the banknotes the government will receive additional “fiscal seigniorage” from banknote production.

If, however, the central bank receives private assets such as gold or credit claims on banks in exchange for the banknotes the banknote seigniorage is mostly stored at the central bank.