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Debasements and Small Coins: An Untold Story of Commodity Money

Gu Jin and Tao Zhu ()

MPRA Paper from University Library of Munich, Germany

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.

Keywords: The debasement puzzle; Gresham's Law; Medieval coinage; Commodity money; Coinage; Shortages of small coins (search for similar items in EconPapers)
JEL-codes: E40 E42 N13 (search for similar items in EconPapers)
Date: 2019-03-30
New Economics Papers: this item is included in nep-his, nep-mac, nep-mon and nep-pay
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