Commodity Money Inflation: Theory and Evidence from France in 1350-1436
Hebrew University of Jerusalem - Department of Economics
Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); LUISS Guido Carli, DPTEA
KSG Working Paper No. RWP02-008
This paper presents a theory of inflation in commodity money and supports it by evidence from inflationary episodes in France during the fourteenth and fifteenth centuries. The paper shows that commodity money can be inflated similarly to fiat money through repeated debasements, which act like devaluations. Furthermore, as with fiat money, demand for commodity money falls with inflation. Unlike fiat money, at high rates of inflation demand for commodity money becomes insensitive to inflation, since commodity money has intrinsic value in addition to its transactions value. Finally, we show that an anticipated stabilization reduces demand for commodity money, which is opposite to the effect of anticipated standard stabilization on demand for fiat money.
Keywords: Economics, Macroeconomics
Number of Pages in PDF File: 46
Keywords: Economics - Macroeconomics
Date posted: February 25, 2004
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