 The Big Problem of Small ChangeThomas Sargent and Francois Velde () Journal of Money, Credit and Banking, 1999, vol. 31, issue 2, 137-61 Abstract: 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. Date: 1999 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:31:y:1999:i:2:p:137-61 Access Statistics for this article Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West More articles in Journal of Money, Credit and Banking from Blackwell Publishing |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.