We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
ACCOUNTING FOR DEBASEMENTS: INDIVISIBILITY OR IMPERFECT RECOGNIZABILITY OF MONEY.
- Authors
Bajaj, Ayushi
- Abstract
The widespread prevalence of debasements in medieval Europe constitutes a puzzle under standard price theory because people voluntarily exchanged heavy coins for lighter ones; the difference being kept as seigniorage. I explore two properties of commodity monies that might make holding light coins more desirable, namely indivisibility and imperfect recognizability. If the agent trades indivisible coins, there are inefficiencies arising from over production of goods when the agent uses the heavier coin. Also, when coins are imperfectly recognizable, the heavy coin faces adverse selection. I find that under some parameters, indivisibility by itself leads to positive revenue following debasements, but in a way that eliminates co‐circulation of coins. While with a sufficient degree of imperfect information, debasements can generate positive revenue and also co‐circulation of coins.
- Subjects
MICROECONOMICS; SEIGNIORAGE (Finance); COINAGE; PUBLIC goods; REVENUE accounting
- Publication
Economic Inquiry, 2020, Vol 58, Issue 1, p374
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/ecin.12822