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Modeling Small Change: A Review Article

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  • Wallace, Neil

    (Pennsylvania State Unversity)

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    Abstract

    In The Big Problem of Small Change, Sargent and Velde apply a cash-in-advance model to the history of coinage and to contemporary thought about coinage. They assert that their model accounts for puzzling observations involving the depreciation and disappearance of small coins. I question its usefulness for that purpose and for other issues pertaining to coinage. My main concern is that their model does not depict the problems usually associated with full-bodied coinage systems-problems that stem from the technological difficulties of having a full-bodied coinage system in which money is portable, divisible, durable, and recognizable.

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    File URL: http://econ.la.psu.edu/papers/nielw9-03-3.pdf
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    Bibliographic Info

    Paper provided by Pennsylvania State University, Department of Economics in its series Working Papers with number 9-03-3.

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    Date of creation: Jan 2003
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    Handle: RePEc:ecl:peneco:9-03-3

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    References

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    1. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
    2. Sargent, Thomas J & Velde, Francois R, 1999. "The Big Problem of Small Change," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(2), pages 137-61, May.
    3. Neil Wallace & Ruilin Zhou, 1996. "A model of a currency shortage," Working Papers 569, Federal Reserve Bank of Minneapolis.
    4. Hanson, John R, II, 1979. "Money in the Colonial American Economy: An Extension," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 281-86, April.
    5. Glassman, Debra & Redish, Angela, 1988. "Currency depreciation in early modern England and France," Explorations in Economic History, Elsevier, vol. 25(1), pages 75-97, January.
    6. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
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    Cited by:
    1. Huberto M. Ennis, 2006. "The problem of small change in early Argentina," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 93-111.
    2. Kaushik Bhattacharya, 2011. "Demand and Supply of Currencies of Small Denominations: A Theoretical Framework," Journal of Quantitative Economics, The Indian Econometric Society, vol. 9(2), pages 123-139, July.
    3. Huberto M. Ennis, 2003. "Shortages of small change in early Argentina," Working Paper 03-12, Federal Reserve Bank of Richmond.
    4. Manjong Lee & Neil Wallace, 2006. "Optimal divisibility when money is costly to produce," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 541-556, July.

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