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The debasement puzzle: an essay on medieval monetary policy

Author

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  • Arthur J. Rolnick
  • Francois R. Velde
  • Warren E. Weber

Abstract

This paper establishes the stylized fact that medieval debasements were accompanied by unusually large minting volumes and revenues. This fact is a puzzle under the commonly held view that metallic coins are commodity money and exchange by weight. An existing explanation is that debased coins were used to reduce the real burden of nominally denominated debts. This explanation is logically flawed: nothing prevents agents from renegotiating contracts and avoid incurring minting costs. The paper also establishes other facts about monetary mutations, which altogether pose a challenge to monetary economics.

Suggested Citation

  • Arthur J. Rolnick & Francois R. Velde & Warren E. Weber, 1995. "The debasement puzzle: an essay on medieval monetary policy," Working Papers 536, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmwp:536
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    File URL: http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=594
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    Cited by:

    1. François R. Velde & Warren E. Weber & Randall Wright, 1999. "A Model of Commodity Money, with Applications to Gresham's Law and the Debasement Puzzle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 291-323, January.
    2. Young Sik Kim & Manjong Lee, 2011. "Unit of Account, Medium of Exchange, and Prices," Discussion Paper Series 1104, Institute of Economic Research, Korea University.

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    Keywords

    Monetary policy;

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