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Abstract

What are the conditions under which Gresham's Law holds? And what are the mechanics of a debasement? To analyze these questions, we develop a model of commodity money with light and heavy coins, imperfect information, and prices determined via bilateral bargaining. There are equilibria with neither, both, or only one type of coin in circulation. When both circulate, coins may trade by weight or by tale. We discuss the extent to which Gresham's Law holds in the various cases. Following a debasement, depending on the incentives offered, equilibria exist with positive seigniorage and a mixture of old and new coins in circulation. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1998.0037
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 2 (1999)
Issue (Month): 1 (January)
Pages: 291-323

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Handle: RePEc:red:issued:v:2:y:1999:i:1:p:291-323

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Related research

Keywords: random matching; commodity money; Gresham's Law; debasement; asymmetric information;

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Find related papers by JEL classification:

• E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
• N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

References

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