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The Big Problem of Small Change Author info | Abstract | Publisher info | Download info | Related research | Statistics Sargent, Thomas J
Velde, Francois R
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The medieval money supply mechanism implemented a commodity standard throughout the denomination structure by imposing mint and melt points for each coin. Mints stood ready to sell (but not to buy) coins for metal. Seigniorage and brassage fees determined the spreads between mint points and melt points for each coin. Because it was cheaper to make a large coin than a smaller one, there were difficulties in aligning the mint-melt points for various coins, and these exposed the system to recurrent shortages, especially of small coins. The authors build a model of the medieval money supply system and modify a cash-in-advance model of demand to capture a preference for small change. They use the model to study the behavior of exchange rates between large and small denomination coins across periods of shortages. The authors also use the model to study how a standard formula of the nineteenth century could be used to supply small change without shortages. The standard formula displaced the medieval supply mechanism with a token currency for all coins but one.
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking .
Volume (Year): 31 (1999)
Issue (Month): 2 (May)
Pages: 137-61
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Handle: RePEc:mcb:jmoncb:v:31:y:1999:i:2:p:137-61Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Lucas, Robert Jr., 1982.
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Huberto M. Ennis, 2006.
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Esteban A. Nicolini & Fernando Ramos, 2006.
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José I. García de Paso, .
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Huberto M. Ennis, 2003.
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Manjong Lee & Neil Wallace, 2006.
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Carlos Álvarez, 2003.
"Spanish Monarchy´S Monetary Problems In The Seventeenth Century: Small Change And Foreign Credit ,"
Working Papers in Economic History
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Francois R. Velde, 1998.
"Lessons from the history of money ,"
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