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  • Cited by 2
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    This article has been cited by the following publications. This list is generated based on data provided by CrossRef.

    Fischer, Andreas M. 2014. IMMIGRATION AND LARGE BANKNOTES. Macroeconomic Dynamics, Vol. 18, Issue. 04, p. 899.

    KIM, YOUNG SIK and LEE, MANJONG 2012. Return on Commodity Money, Small Change Problems, and Fiat Money. Journal of Money, Credit and Banking, Vol. 44, Issue. 2-3, p. 533.



  • Angela Redish (a1) and Warren E. Weber (a2)
  • DOI:
  • Published online: 15 December 2010

Contemporaries and economic historians have noted several features of medieval and early modern European monetary systems that are hard to analyze using models of centralized exchange. For example, contemporaries complained of recurrent shortages of small change and argued that an abundance/dearth of money had real effects on exchange, especially for the poor. To confront these facts, we build a random-matching monetary model with two indivisible coins with different intrinsic values. The model shows that small change shortages can exist, in the sense that adding small coins to an economy with only large coins is welfare-improving. This effect is amplified by increases in trading opportunities. Further, changes in the quantity of monetary metals affect the real economy and the amount of exchange as well as the optimal denomination size. Finally, the model shows that replacing full-bodied small coins with tokens is not necessarily welfare-improving.

Corresponding author
Address correspondence to: Warren E. Weber, Research Department, Federal Reserve Bank of Minneapolis, Minneapolis, MN 55480-0291, USA; e-mail:
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M. Lee , N. Wallace , and T. Zhu (2005) Modeling denomination structures. Econometrica 73 (3), 949960.

J. Munro (1988) Deflation and the petty coinage problem in the late-medieval economy: The case of Flanders, 1334–1484. Explorations in Economic History 25, 387423.

T.J. Sargent and F.R. Velde (2002) The Big Problem of Small Change. Princeton, NJ: Princeton University Press.

T. Sargent and N. Wallace (1983) A model of commodity money. Journal of Monetary Economics 12 (1), 163187.

F.R. Velde and W.E. Weber (2000) A model of bimetallism. Journal of Political Economy 108 (6), 12101234.

F.R. Velde , W.E. Weber , and R. Wright (1999) A model of commodity money, with applications to Gresham's law and the debasement puzzle. Review of Economic Dynamics 2 (1), 291323.

N. Wallace and R. Zhou (1997) A model of a currency shortage. Journal of Monetary Economics 40 (3), 555572.

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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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