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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. 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.
    3. Svensson, Roger & Westermark, Andreas, 2015. "Renovatio Monetae: Gesell Taxes in Practice," Working Paper Series 1083, Research Institute of Industrial Economics.
    4. Allen,Martin, 2012. "Mints and Money in Medieval England," Cambridge Books, Cambridge University Press, number 9781107014947, November.
    5. 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.
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    2. Adam Brzezinski & Nuno Palma & Francois R. Velde, 2024. "Understanding Money Using Historical Evidence," Working Paper Series WP 2024-10, Federal Reserve Bank of Chicago.

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