Re-Coinage as a Monetary Tax: Conditions, Consequences and Comparisons with Debasement
AbstractRe-coinage implies that old coins are declared invalid and exchanged for new ones at fixed exchange rates and dates. Empirical evidence shows that re-coinage could occur as often as twice a year within a currency area in the Middle Ages. The exchange fee at re-coinage worked as a monetary tax for trade and inhabitants. The main purpose here is to set up a simple theory about short-lived coins, which has not been done before. It turns out that re-coinage works particularly well in relatively undeveloped economies. Such economies had a small volume of coins in circulation, which facilitates both re-minting and monitoring of a short-lived coinage system. Re-coinage had both positive and negative overlapping consequences: 1) a stable coinage with respect to weight and fineness, and no long-term inflation; 2) short-term disturbances in the velocity of money, price-levels and the volume of transactions; 3) the coins' function as a store of value deteriorated; and 4) inhibitions on trade, business and the division of labor. Debasement was the alternative method for collecting a monetary tax. It was less restrictive and had lower administrative costs for the coin issuer than re-coinage. Besides low monetization, the strong position of ecclesiastical coin issuers, who disliked manipulations of weights and fineness, was likely a factor in why re-coinage was preferred to debasement. However, the costs for society as a whole could be higher for secret debasements than routine calendar driven re-coinage, due to the high uncertainty.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 950.
Length: 27 pages
Date of creation: 09 Jan 2013
Date of revision:
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Re-coinage; SShort-lived coinage system; Debasement; Monetary tax; Monetization; Inflation; Monetary system;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-09 (All new papers)
- NEP-MAC-2013-03-09 (Macroeconomics)
- NEP-MON-2013-03-09 (Monetary Economics)
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- Svensson, Roger, 2013. "The Bracteate as Economic Idea and Monetary Instrument," Working Paper Series 973, Research Institute of Industrial Economics.
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