THE BEST AND WORST OF CURRENCIES - SEIGNIORAGE AND CURRENCY POLICY INSPAIN, 1597-1650

The Spanish Monarchy pursued a rational policy of price discrimination among its Castilian currencies while financing its early-seventeenth- century wars. Large-denomination gold and silver coins circulated inte rnationally, forcing the Monarchy to act more competitively and not se ek additional short-run revenue. In contrast, petty coinage was a loca l monopoly. The Monarchy raised seigniorage rates and issued large qua ntities, generating large revenues. The nominal petty money stock grew rapidly, then fluctuated. The real petty money stock grew, then varie d little as petty currency depreciation dampened nominal changes.