Optimal divisibility of money when money is costly to produce

Manjong Lee; Neil Wallace

doi:10.1016/j.red.2006.05.001

Optimal divisibility of money when money is costly to produce

Manjong Lee, Neil Wallace

Department of Economics

Research output: Contribution to journal › Article › peer-review

5 Citations (Scopus)

Abstract

There is wide agreement that currency was not available in conveniently small denominations prior to the 19th century. Here, estimates of the costs of providing and maintaining money (coins) in 15th century Europe and parameterized versions of a matching model of money are used to find the optimal degree of divisibility. Although the optima are sensitive to the specification of the matching model, the optimal sizes we find agree in order of magnitude with the sizes of the most common coins in 15th century Europe.

Original language	English
Pages (from-to)	541-556
Number of pages	16
Journal	Review of Economic Dynamics
Volume	9
Issue number	3
DOIs	https://doi.org/10.1016/j.red.2006.05.001
Publication status	Published - 2006 Jul

Keywords

Coinage in the fifteenth century
Divisibility of currency
Matching model

ASJC Scopus subject areas

Economics and Econometrics

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