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Domestic exchange rate determination in Renaissance Florence

Domestic exchange rate determination in Renaissance Florence We explore the price-setting protocol used by the money-changers guild, the Arte del Cambio, to set the exchange rate between domestic gold and silver coins in Renaissance Florence, a precursor in purpose and set-up to the contemporary system of posting interest rates. We show that the protocol is evolutionarily stable and designed to converge to the efficient price, which had important implications to the political economy of Florence and the stability of its monetary system. We also show that the predicted dynamics of convergence are consistent with surviving exchange rates from 1389 to 1432, thereby linking the empirical properties of the historical data to the institutional features of the guild that generated them. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Cliometrica Springer Journals

Domestic exchange rate determination in Renaissance Florence

Cliometrica , Volume 11 (3) – Jul 8, 2016

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References (97)

Publisher
Springer Journals
Copyright
Copyright © 2016 by Springer-Verlag Berlin Heidelberg
Subject
Economics; Economic Theory/Quantitative Economics/Mathematical Methods; History, general; Econometrics; History of Economic Thought/Methodology
ISSN
1863-2505
eISSN
1863-2513
DOI
10.1007/s11698-016-0146-5
Publisher site
See Article on Publisher Site

Abstract

We explore the price-setting protocol used by the money-changers guild, the Arte del Cambio, to set the exchange rate between domestic gold and silver coins in Renaissance Florence, a precursor in purpose and set-up to the contemporary system of posting interest rates. We show that the protocol is evolutionarily stable and designed to converge to the efficient price, which had important implications to the political economy of Florence and the stability of its monetary system. We also show that the predicted dynamics of convergence are consistent with surviving exchange rates from 1389 to 1432, thereby linking the empirical properties of the historical data to the institutional features of the guild that generated them.

Journal

CliometricaSpringer Journals

Published: Jul 8, 2016

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