Seigniorage Compensation for Swaziland and Policy Implication.

Seigniorage compensation for Swaziland is found to depend on Emalangeni in circulation in Swaziland besides the obvious effect of an increase in ZAR/Rands in circulation in South Africa. Where a percent increase in Emalangeni in circulation in Swaziland at time t decreases seigniorage compensation by 0.186 percent and a percent increase in Emalangeni in circulation at time t-1 decreases seigniorage compensation by 0.134 percent through both substitution and base effects respectively. Thus a conservative monetary policy is recommended to sustain seigniorage upwards, to arrest inflationary pressures and sustain the fixed exchange rate.