Commodity Money Inflation: Theory and Evidence from France in 1350-1436
This paper presents a theory of inflation in commodity money and supports it by evidence from inflationary episodes in France during the fourteenth and fifteenth centuries. The paper shows that commodity money can be inflated similarly to fiat money through repeated debasements, which act like devaluations. Furthermore, as with fiat money, demand for commodity money falls with inflation. Unlike fiat money, at high rates of inflation demand for commodity money becomes insensitive to inflation, since commodity money has intrinsic value in addition to its transactions value. Finally, we show that an anticipated stabilization reduces demand for commodity money, which is opposite to the effect of anticipated standard stabilization on demand for fiat money.
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|Date of creation:||Feb 2002|
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- Beatrix Paal, 2000. "Destabilizing effects of a successful stabilization: a forward-looking explanation of the second Hungarian hyperinflation," Economic Theory, Springer, vol. 15(3), pages 599-630.
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"The debasement puzzle: an essay on medieval monetary history,"
Federal Reserve Bank of Minneapolis, issue Fall, pages 8-20.
- Rolnick, Arthur J. & Velde, François R. & Weber, Warren E., 1996. "The Debasement Puzzle: An Essay on Medieval Monetary History," The Journal of Economic History, Cambridge University Press, vol. 56(04), pages 789-808, December.
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- Gandal, Neil & Sussman, Nathan, 1997. "Asymmetric Information and Commodity Money: Tickling the Tolerance in Medieval France," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 440-57, November.
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