Debasements and Small Coins: An Untold Story of Commodity Money

Abstract This paper draws quantitative implications for certain historical coinage issues by adapting a fiat‐money multiple‐denomination model. The model is parameterized to match some key monetary characteristics of late medieval England. A small coin has a more prominent role than mere small change; thus, a shortage of small coins is very costly for poor people, and when commerce advances, it is very costly for all people. A debasement may effectively supply substitutes for small coins in shortage. But debasements cannot be an ultimate solution because the precious metals used to produce coins are practically indivisible.