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.:
- Redish, Angela & Weber, Warren E., 2011.
"Coin Sizes And Payments In Commodity Money Systems,"
Cambridge University Press, vol. 15(S1), pages 62-82, April.
- Angela Redish & Warren E. Weber, 2008. "Coin sizes and payments in commodity money systems," Working Papers 658, Federal Reserve Bank of Minneapolis.
- Angela Redish & Warren E. Weber, 2008. "Coin sizes and payments in commodity money systems," Staff Report 416, Federal Reserve Bank of Minneapolis.
- Gregory Clark, 2007. "The long march of history: Farm wages, population, and economic growth, England 1209-1869 -super-1," Economic History Review, Economic History Society, vol. 60(1), pages 97-135, 02.
- Francois R. Velde & Warren E. Weber, 1998.
"A model of bimetallism,"
Working Paper Series
WP-98-8, Federal Reserve Bank of Chicago.
- Manjong Lee & Neil Wallace & Tao Zhu, 2005. "Modeling Denomination Structures," Econometrica, Econometric Society, vol. 73(3), pages 949-960, 05.
- Redish,Angela, 2006.
Cambridge University Press, number 9780521028936, December.
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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