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Domestic exchange rate determination in Renaissance Florence

G. Geoffrey Booth () and Sanders Chang ()
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G. Geoffrey Booth: Michigan State University

Cliometrica, 2017, vol. 11, issue 3, No 6, 405-445

Abstract: Abstract We explore the price-setting protocol used by the money-changers guild, the Arte del Cambio, to set the exchange rate between domestic gold and silver coins in Renaissance Florence, a precursor in purpose and set-up to the contemporary system of posting interest rates. We show that the protocol is evolutionarily stable and designed to converge to the efficient price, which had important implications to the political economy of Florence and the stability of its monetary system. We also show that the predicted dynamics of convergence are consistent with surviving exchange rates from 1389 to 1432, thereby linking the empirical properties of the historical data to the institutional features of the guild that generated them.

Keywords: Exchange rates; Money changing; Evolutionary stability; Renaissance Florence; LIBOR (search for similar items in EconPapers)
JEL-codes: G10 G21 N23 P12 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11698-016-0146-5

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