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Renovatio Monetae: When Gesell Taxes Worked

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  • Roger Svensson
  • Andreas Westermark

Abstract

Gesell taxes on money have recently received attention as a way of alleviating the zero lower bound on interest rates. Less known is that such taxes generated seigniorage in medieval Europe for around two centuries. When a Gesell tax was levied, current coins ceased to be legal and had to be exchanged into new coins for a fee. Using a cash‐in‐advance model, we analyze under what conditions agents exchange coins and the tax generates revenues. A low exchange fee, high punishments for using old coins, and a long time period between re‐mintings induce people to use new coins.

Suggested Citation

  • Roger Svensson & Andreas Westermark, 2020. "Renovatio Monetae: When Gesell Taxes Worked," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(2), pages 821-846, May.
    • Handle: RePEc:wly:iecrev:v:61:y:2020:i:2:p:821-846
    DOI: 10.1111/iere.12441
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    References listed on IDEAS

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    1. Willem H. Buiter & Nikolaos Panigirtzoglou, 2003. "Overcoming the zero bound on nominal interest rates with negative interest on currency: gesell's solution," Economic Journal, Royal Economic Society, vol. 113(490), pages 723-746, October.
    2. Allen,Martin, 2012. "Mints and Money in Medieval England," Cambridge Books, Cambridge University Press, number 9781107014947.
    3. Roger Svensson, 2016. "Periodic recoinage as a monetary tax: conditions for the rise and fall of the bracteate economy," Economic History Review, Economic History Society, vol. 69(4), pages 1108-1131, November.
    4. Sussman, Nathan & Zeira, Joseph, 2003. "Commodity money inflation: theory and evidence from France in 1350-1436," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1769-1793, November.
    5. Svensson, Roger & Westermark, Andreas, 2015. "Renovatio Monetae: Gesell Taxes in Practice," Working Paper Series 1083, Research Institute of Industrial Economics.
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