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Domestic exchange rate determination in Renaissance Florence

Author

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  • G. Geoffrey Booth

    (Michigan State University)

  • Sanders S. Chang

    (University of Dayton)

Abstract

We explore the price-setting protocol used by the money-changers guild, the Arte del Cambio, to set the exchange rate between domestic gold and silver coins in Renaissance Florence, a precursor in purpose and set-up to the contemporary system of posting interest rates. We show that the protocol is evolutionarily stable and designed to converge to the efficient price, which had important implications to the political economy of Florence and the stability of its monetary system. We also show that the predicted dynamics of convergence are consistent with surviving exchange rates from 1389 to 1432, thereby linking the empirical properties of the historical data to the institutional features of the guild that generated them.

Suggested Citation

  • G. Geoffrey Booth & Sanders S. Chang, 2017. "Domestic exchange rate determination in Renaissance Florence," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 11(3), pages 405-445, September.
    • Handle: RePEc:spr:cliomt:v:11:y:2017:i:3:d:10.1007_s11698-016-0146-5
    DOI: 10.1007/s11698-016-0146-5
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    More about this item

    Keywords

    Exchange rates; Money changing; Evolutionary stability; Renaissance Florence; LIBOR;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • P12 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Enterprises

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