Fragmented Monetary Authority, Devaluation, and Oil-Backed Fiscal Space

Fragmented Monetary Authority, Devaluation, and Oil-Backed Fiscal Space | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Fragmented Monetary Authority, Devaluation, and Oil-Backed Fiscal Space taoufik Rajhi This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-9315946/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 4 You are reading this latest preprint version Abstract How does fragmented monetary authority affect the valuation and sustainability of seigniorage? This paper extends the comprehensive balance-sheet framework of Buiter [2021] in three directions. First, it shows that under fragmented monetary authority—where rival institutions issue against a common inflation-tax base—each authority only partially internalises the marginal dilution of seigniorage capacity, producing over-issuance relative to the unified optimum. Second, it introduces an exchange-rate channel in which devaluation generates an immediate balance-sheet revaluation gain on foreign assets; under full purchasing power parity the gain is exactly offset in present value by future inflation-tax incidence, while under partial pass-through the offset is attenuated, creating contingent and temporary fiscal room. Third, it adds an oil-revenue extension showing that exchange-rate-sensitive foreign-currency revenue makes devaluation and monetary financing strategic substitutes in the government’s fiscal toolkit. These three extensions are quantitatively illustrated against Libyan balance-sheet, inflation, and oil-revenue data, where the combination of dual central banking, financial repression, and hydrocarbon dependence creates an unusually informative setting for the framework. JEL: E52, E58, E62, F31, H63 seigniorage central bank balance sheet fragmented monetary au thority devaluation inflation tax oil revenue Libya Full Text Cite Share Download PDF Status: Under Review Version 1 posted Reviewers agreed at journal 21 Apr, 2026 Reviewers invited by journal 13 Apr, 2026 Editor assigned by journal 06 Apr, 2026 First submitted to journal 03 Apr, 2026 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. 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