Gold Coins in a Fiat Currency

Neuberger, Anthony

doi:10.2139/ssrn.319382

Abstract

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Gold Coins in a Fiat Currency

Anthony Neuberger

University of Warwick - Warwick Business School

April 2002

London Business School IFA Working Paper No. 350-2002

Abstract:
We investigate the feasibility of minting gold coins with a face value in excess of their bullion value, to circulate as currency alongside paper money. The problem is modelled in a partial equilibrium setting where individuals hold money because they face unpredictable liquidity shocks. Gold coins have a positive expected return. They are less costly to hold than money and are used to meet large, infrequent shocks. An issue of gold coins increases total money demand. Depending on the nature of the liquidity shocks, the seignorage gains to Government from the increase in money holdings may exceed the cost of the gold used in the coins.

Number of Pages in PDF File: 40

JEL Classification: E410, E420, E510

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Date posted: August 6, 2002

Suggested Citation

Neuberger, Anthony, Gold Coins in a Fiat Currency (April 2002). London Business School IFA Working Paper No. 350-2002. Available at SSRN: http://ssrn.com/abstract=319382 or http://dx.doi.org/10.2139/ssrn.319382

Contact Information

Anthony Neuberger (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom