Coin Sizes And Payments In Commodity Money Systems
AbstractCommodity money standards in medieval and early modern Europe were characterized by recurring complaints of small change shortages and by numerous debasements of the coinage. To confront these facts, we build a random matching monetary model with two indivisible coins with different intrinsic values. The model shows that small change shortages can exist in the sense that changes in the size of the small coin affect ex ante welfare. Further, the optimal ratio of coin sizes is shown to depend upon the trading opportunities in a country and a country's wealth. Thus, coinage debasements can be interpreted as optimal responses to changes in fundamentals. Further, the model shows that replacing full-bodied small coins with tokens is not necessarily welfare-improving.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 15 (2011)
Issue (Month): S1 (April)
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Other versions of this item:
- Angela Redish & Warren E. Weber, 2008. "Coin sizes and payments in commodity money systems," Staff Report 416, Federal Reserve Bank of Minneapolis.
- Angela Redish & Warren E. Weber, 2008. "Coin sizes and payments in commodity money systems," Working Papers 658, Federal Reserve Bank of Minneapolis.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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