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Renovatio Monetae: Gesell Taxes in Practice

Author

Listed:
  • Svensson, Roger

    () (The Research Institute of Industrial Economics)

  • Westermark, Andreas

    () (Research Department, Central Bank of Sweden)

Abstract

Gesell taxes on money holdings have received attention in recent decades as a way of alleviating the zero lower bound on interest rates. Less known is that such a tax was the predominant method used to generate seigniorage in large parts of medieval Europe for around two centuries. When the Gesell tax was levied, current coins ceased to be legal tender and had to be exchanged into new coins for a fee - an institution known as renovatio monetae or periodic re-coinage. This could occur as often as twice a year. Using a cash-in-advance model, we analyze under which conditions agents prefer to re-mint their coins and the system generates tax revenues. We also analyze how prices fluctuate over an issue period.

Suggested Citation

  • Svensson, Roger & Westermark, Andreas, 2016. "Renovatio Monetae: Gesell Taxes in Practice," Working Paper Series 327, Sveriges Riksbank (Central Bank of Sweden).
  • Handle: RePEc:hhs:rbnkwp:0327
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    File URL: http://www.riksbank.se/Documents/Rapporter/Working_papers/2016/rap_wp327_160809.pdf
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    References listed on IDEAS

    as
    1. Martin Menner, 2011. ""Gesell Tax" and Efficiency of Monetary Exchange," Working Papers. Serie AD 2011-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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    5. Allen,Martin, 2012. "Mints and Money in Medieval England," Cambridge Books, Cambridge University Press, number 9781107014947, December.
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    More about this item

    Keywords

    Seigniorage; Gesell tax; periodic re-coinage; cash-in-advance model;

    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

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