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The economics of small change: resolving coinage challenges in medieval Europe

Published online by Cambridge University Press:  15 January 2025

Roger Svensson  and
Andreas Westermark
Roger Svensson*
Affiliation:
The Research Institute of Industrial Economics, Stockholm
Andreas Westermark*
Affiliation:
Sveriges Riksbank
*
Roger Svensson, The Research Institute of Industrial Economics (IFN), PO Box 55665, SE-102 15 Stockholm, Sweden, email: roger.svensson@ifn.se
Andreas Westermark, Research Division, Sveriges Riksbank, SE-103 37, Stockholm, Sweden, email: andreas.westermark@riksbank.se
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Abstract

In medieval Europe's coinage systems, introducing small-denomination coins was a significant challenge due to their higher relative production costs, often leading to shortages. To address this issue, economic theory suggests a standard formula: mint small coins as overvalued credit money on the government's account and convert them on demand at a pegged rate. This article explores the alternative methods adopted during different periods to mitigate this issue. In the early and high Middle Ages, mints employed a simple yet effective strategy: dividing larger coins into smaller units, bypassing the cost barrier. Our analysis of coin hoards from this era confirms the success of this method in preventing small change scarcity. Central and northern European minting authorities innovated with unifaced ‘hohlpfennigs’ in the late Middle Ages, utilizing cost-efficient technology. Our analysis demonstrates the absence of hohlpfennig shortages. It elucidates the economic and technological factors influencing this minting method and its eventual decline by the early sixteenth century. These historical insights underscore that small change production was primarily a supply-side challenge, offering valuable lessons for modern economic systems.

Keywords

small changeproduction costsminting technologyhohlpfennigs

JEL classification

E51: Money Supply • Credit • Money Multipliers N13: Europe: Pre-1913 E42: Monetary Systems • Standards • Regimes • Government and the Monetary System • Payment Systems
Type
Article
Information
Financial History Review , First View , pp. 1 - 26
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Copyright
Copyright © The Author(s), 2025. Published by Cambridge University Press on behalf of the European Association for Banking and Financial History

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Footnotes

The authors would like to thank the participants at the XVI International Numismatic Conference in Warsaw for their insightful comments. Roger Svensson gratefully acknowledges financial support from the Sven Svensson Foundation for Numismatics and the Gunnar Ekström Foundation. The opinions expressed in this article are the sole responsibility of the authors and should not be interpreted as reflecting the views of Sveriges Riksbank.

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