A model of commodity money with minting and melting
AbstractWe construct a random matching model of a monetary economy with commodity money in the form of potentially different types of silver coins that are distinguishable by the quantity of metal they contain. The quantity of silver in the economy is assumed to be fixed, but agents can mint and melt coins. Coins yield no utility, but can be traded. Uncoined silver yields direct utility to the holder. We find that optimal coin size increases with the probability of trade and with the stock of silver. We use these predictions of our model to analyze the coinage decisions of the monetary authorities in medieval Venice and England. Our model provides theoretical support for the view that decisions about coin sizes and types during the medieval period reflected a desire to improve the economic welfare of the general population, not just the desire for seigniorage revenue.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 460.
Date of creation: 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-09 (All new papers)
- NEP-CBA-2011-08-09 (Central Banking)
- NEP-DGE-2011-08-09 (Dynamic General Equilibrium)
- NEP-MON-2011-08-09 (Monetary Economics)
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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658, Federal Reserve Bank of Minneapolis.
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- Angela Redish & Warren E. Weber, 2008. "Coin sizes and payments in commodity money systems," Staff Report 416, Federal Reserve Bank of Minneapolis.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Was medieval seigniorage welfare improving?
by Economic Logician in Economic Logic on 2011-08-26 14:18:00
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