The Coining of an Economy : When, Why, How

Abstract

Coins have played a crucial role in every economy. So close is their relationship that almost every economy has introduced at least one new denomination of coin to add it to its original set. This raises the question, when does an economy introduce a new denomination of coin ? To answer the question, this paper studied a diverse set of 10 different economies over the period from 1975 – 2019. It inferred that sticky inflation compels an economy to introduce a new denomination; a low denominated but high velocity banknote is coined as financial prudence, and durability makes the coin a better alternative to fund routine transactions at the bottom of the pyramid. Even when coins are absent in the economy, had coins existed, sticky inflation would have forced conversion of lower banknote denomination to a coin.