Renovatio Monetae: When Gesell Taxes Worked

26 Pages Posted: 30 Oct 2020

See all articles by Roger Svensson

Roger Svensson

Research Institute of Industrial Economics (IFN)

Andreas Westermark

Sveriges Riksbank

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Date Written: May 2020

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 generated 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. Using a cash‐in‐advance model, we analyze under what conditions agents exchange coins and the tax generates revenues. A low exchange fee, high punishments for using old coins, and a long time period between re‐mintings induce people to use new coins.

Suggested Citation

Svensson, Roger and Westermark, Andreas, Renovatio Monetae: When Gesell Taxes Worked (May 2020). International Economic Review, Vol. 61, Issue 2, pp. 821-846, 2020, Available at SSRN: https://ssrn.com/abstract=3721378 or http://dx.doi.org/10.1111/iere.12441

Roger Svensson

Research Institute of Industrial Economics (IFN) ( email )

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Andreas Westermark (Contact Author)

Sveriges Riksbank ( email )

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Sweden

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