Renovatio Monetae: Gesell Taxes in Practice

Riksbank Research Paper Series No. 151

Sveriges Riksbank Working Paper Series No. 327

43 Pages Posted: 7 Dec 2016

See all articles by Roger Svensson

Roger Svensson

Research Institute of Industrial Economics (IFN)

Andreas Westermark

Sveriges Riksbank

Date Written: July 2016

Abstract

Gesell taxes on money holdings have received attention in recent decades as a way of alleviating the zero lower bound on interest rates. Less known is that such a tax was the predominant method used to generate seigniorage in large parts of medieval Europe for around two centuries. When the Gesell tax was levied, current coins ceased to be legal tender and had to be exchanged into new coins for a fee - an institution known as renovatio monetae or periodic re-coinage. This could occur as often as twice a year. Using a cash-in-advance model, we analyze under which conditions agents prefer to re-mint their coins and the system generates tax revenues. We also analyze how prices fluctuate over an issue period.

Keywords: Seigniorage, Gesell tax, periodic re-coinage, cash-in-advance model

JEL Classification: E31, E42, E52, N13

Suggested Citation

Svensson, Roger and Westermark, Andreas, Renovatio Monetae: Gesell Taxes in Practice (July 2016). Riksbank Research Paper Series No. 151, Sveriges Riksbank Working Paper Series No. 327, Available at SSRN: https://ssrn.com/abstract=2871900 or http://dx.doi.org/10.2139/ssrn.2871900

Roger Svensson

Research Institute of Industrial Economics (IFN) ( email )

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Andreas Westermark (Contact Author)

Sveriges Riksbank ( email )

Brunkebergstorg 11
Stockholm, 10337
Sweden

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