Optimal divisibility of money when money is costly to produce

Manjong Lee, Neil Wallace

Research output: Contribution to journalArticle

5 Scopus citations

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 languageEnglish (US)
Pages (from-to)541-556
Number of pages16
JournalReview of Economic Dynamics
Volume9
Issue number3
DOIs
StatePublished - Jul 1 2006

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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