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Filtering by: Creator Redish, Angela, 1952- Remove constraint Creator: Redish, Angela, 1952-

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  • 8049g5150?file=thumbnail
    Creator: Redish, Angela, 1952- and Weber, Warren E.
    Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department)
    Number: 658
    Abstract:

    Commodity money standards in medieval and early modern Europe were characterized by recurring complaints of small change shortages and by numerous debasements of the coinage. To confront these facts, we build a random matching monetary model with two indivisible coins with different intrinsic values. The model shows that small change shortages can exist in the sense that changes in the size of the small coin affect ex ante welfare. Further, the optimal ratio of coin sizes is shown to depend upon the trading opportunities in a country and a country’s wealth. Thus, coinage debasements can be interpreted as optimal responses to changes in fundamentals. Further, the model shows that replacing full-bodied small coins with tokens is not necessarily welfare-improving.

    Keyword: Random matching, Commodity money, Optimal denominations, and Gresham's Law
  • St74cq505?file=thumbnail
    Creator: Redish, Angela, 1952- and Weber, Warren E.
    Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department)
    Number: 460
    Abstract:

    We construct a random matching model of a monetary economy with commodity money in the form of potentially different types of silver coins that are distinguishable by the quantity of metal they contain. The quantity of silver in the economy is assumed to be fixed, but agents can mint and melt coins. Coins yield no utility, but can be traded. Uncoined silver yields direct utility to the holder. We find that optimal coin size increases with the probability of trade and with the stock of silver. We use these predictions of our model to analyze the coinage decisions of the monetary authorities in medieval Venice and England. Our model provides theoretical support for the view that decisions about coin sizes and types during the medieval period reflected a desire to improve the economic welfare of the general population, not just the desire for seigniorage revenue.

  • 9k41zd57g?file=thumbnail
    Creator: Redish, Angela, 1952- and Weber, Warren E.
    Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department)
    Number: 416
    Abstract:

    Contemporaries, and economic historians, have noted several features of medieval and early modern European monetary systems that are hard to analyze using models of centralized exchange. For example, contemporaries complained of recurrent shortages of small change and argued that an abundance/dearth of money had real effects on exchange. To confront these facts, we build a random matching monetary model with two indivisible coins with different intrinsic values. The model shows that small change shortages can exist in the sense that adding small coins to an economy with only large coins is welfare improving. This effect is amplified by increases in trading opportunities. Further, changes in the quantity of monetary metals affect the real economy and the amount of exchange as well as the optimal denomination size. Finally, the model shows that replacing full-bodied small coins with tokens is not necessarily welfare improving.

    Keyword: Gresham’s Law, Optimal Denominations, Commodity Money, and Random Matching