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Debasements and Small Coins: An Untold Story of Commodity Money

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  • Jin, Gu
  • Zhu, Tao

Abstract

This paper draws quantitative implications for some historical coinage issues from an existing formulation of a theory that explains the society's demand for multiple denominations. The model is parameterized to match some key monetary characteristics in late medieval England. Inconvenience for an agent due to a shortage of a type of coin is measured by the difference between his welfare given the shortage and his welfare in a hypothetical scenario that the mint suddenly eliminates the shortage. A small coin has a more prominent role than small change. Because of this role, a shortage of small coins is highly inconvenient for poor people and, the inconvenience may extend to all people when commerce advances. A debasement may effectively supply substitutes to small coins in shortage. Large increase in the minting volume, cocirculation of old and new coins, and circulation by weight, critical facts constituting the debasement puzzle, emerge in the equilibrium path that follows the debasement.

Suggested Citation

  • Jin, Gu & Zhu, Tao, 2019. "Debasements and Small Coins: An Untold Story of Commodity Money," MPRA Paper 93057, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93057
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    File URL: https://mpra.ub.uni-muenchen.de/93057/1/MPRA_paper_93057.pdf
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    References listed on IDEAS

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    Cited by:

    1. Allan Hernandez-Chanto, 2020. "The extrinsic value of low-denomination money holdings," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 263-280, October.

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    More about this item

    Keywords

    The debasement puzzle; Gresham's Law; Medieval coinage; Commodity money; Coinage; Shortages of small coins;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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