Renovatio Monetae: When Gesell Taxes Worked

International Economic Review, Vol. 61(2), pp. 821-46, 2020

45 Pages Posted: 14 Jul 2020

See all articles by Roger Svensson

Roger Svensson

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 2 versions of this paper

Date Written: September 12, 2018

Abstract

Gesell taxes on money have recently received attention as a way of alleviating the zero lower bound on interest rates. Less known is that such taxes were an important method for generating seigniorage in medieval Europe for around two centuries. When a Gesell tax was levied, current coins ceased to be legal and had to be exchanged into new coins for a fee. This could occur as often as twice a year. Using a cash-in-advance model, we analyze under what conditions agents exchange coins and the tax generates revenues. A key result is that the system broke down because of increases in …scal spending, and not because non-cash alternatives, e.g., bartering, became more costly. We also analyze how prices ‡uctuated over an issue period.

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

JEL Classification: E42, E52, N13

Suggested Citation

Svensson, Roger, Renovatio Monetae: When Gesell Taxes Worked (September 12, 2018). International Economic Review, Vol. 61(2), pp. 821-46, 2020, Available at SSRN: https://ssrn.com/abstract=3632347

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