Deflation and the petty coinage problem in the late-medieval economy: The case of Flanders, 1334–1484

Abstract

Monetary historians have debated whether too many or too few petty coins, those most needed by the general populace, were struck in medieval Europe. But exactly how many were struck can be determined only for Flanders, where petty coinage usually accounted for 1% or less of the bullion minted. These mintoutput statistics are explained in part by the demand for high-denomination coins by most merchants who supplied bullion to the mints; but equally also by the relatively small need to replace stocks of petty coin. Severe petty-coin scarcity was not likely a chronic condition in medieval Flanders, but did occur in the deflationary mid-fifteenth century, instigating innovations in state monetary policy.

Accounting for Debasements: Indivisibility or Imperfect Recognizability of Money

“…Proposition 3 shows that under some parameters, the presence of indivisible coins by itself can generate positive revenue following debasements, but in a way that eliminates co-circulation of coins, that is, only the new lighter coins circulate post debasement. Indivisibility, in the form of lack of small change, was indeed a major concern pertaining to the commodity money system as has been documented abundantly, including by Munro (1988) and Sargent and Velde (2014). Despite heavier coins commanding a higher value, lighter coins can be beneficial as they increase the incentives of the money holder to trade.…”

“…Indivisibility, in the form of lack of small change, was indeed a major concern pertaining to the commodity money system as has been documented abundantly, including by Munro (1988) and Sargent and Velde (2014). Despite heavier coins commanding a higher value, lighter coins can be beneficial as they increase the incentives of the money holder to trade.…”

Coin Production in the Low Countries: Fourteenth Century to the Present.

“…Research into the production of small change thus has the potential to also tie in to questions about the importance of coins for the emergence of commercialized societies that relied to a large extent on wage labour. Did temporary money shortages cause problems, 57 or could they be countered by a culture of credit? 58 Mintmasters' accounts can also reveal important information about beneficial monetary policy.…”

Coin Assaying and Commodity Money

“…The history of the commodity money, and to some extent of the financial system, is also about the technological difficulties of achieving a system with portable, divisible and recognizable assets that would make them as liquid as fiat money. Indivisibility, in the form of the lack of small change was indeed a major impediment to trade in the commodity money system and has been abundantly documented (Munro 1988, Glassman and Redish 1988, Redish 2000, Sargent and Velde 2002). While we focus on the answer to the information problem, we also want to maintain the other defining characteristics of the commodity system, especially indivisibility.…”