RENOVATIO MONETAE: WHEN GESELL TAXES WORKED |
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Authors: | Roger Svensson Andreas Westermark |
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Institution: | 1. The Research Institute of Industrial Economics (IFN), Sweden;2. Sveriges Riksbank, Sweden |
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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. |
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