What is seigniorage?

Seigniorage is the profit made by a government or central bank from issuing currency, specifically the difference between the face value of the money and the cost of producing it. This revenue can arise from the minting of coins or the printing of paper money. Seigniorage effectively allows governments to finance expenditures without raising taxes or borrowing, although excessive reliance on it can lead to inflation. It is an important concept in monetary policy and fiscal management.