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Coin Assaying and Commodity Money

Author

Listed:
  • Vincent Bignon
  • Richard Dutu

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

We build a model of search and matching in which agents trade using coins that are imperfectly recognizable, but have access to a coin inspection technology-known as coin assaying-that reveals the intrinsic content of coins for a fee. We consider two sources of imperfect information: counterfeit coins and clipping. With counterfeits, coin assaying reduces the extent of inefficiencies associated with imperfect recognizability of coins (namely lower traded quantities and lower trading frequencies). Yet coin assaying does not necessarily increase welfare, because it unmasks counterfeits that then trade at a discount, reducing total output. With clipping, we show that agents clip for two reasons: in the hope of passing an inferior coin for a superior one, and to reduce the purchasing power of coins that are too valuable. Although coin assaying could remove the first type of clipping, it had no effect on the second.

Suggested Citation

  • Vincent Bignon & Richard Dutu, 2016. "Coin Assaying and Commodity Money," Post-Print hal-01385993, HAL.
    • Handle: RePEc:hal:journl:hal-01385993
    DOI: 10.1017/S1365100515000875
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    3. Cristian Frasser & Lucie Lebeau, 2023. "Complementary Currencies and Liquidity: The Case of Coca-Base Money," Working Papers 2307, Federal Reserve Bank of Dallas.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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