By Todd Buell 

FRANKFURT--The European Central Bank is currently struggling to get inflation going again. It is printing money to buy bonds in its quantitative easing program, offering long-term loans to banks on the condition that they lend to firms, and it cut its deposit rate into negative territory.

But it is still way off the mark. Maybe it is time the ECB tried something a little bit more radical, something from the playbook of authorities from the Middle Ages: recoinage.

Researchers Andreas Westermark and Roger Svensson at Sweden's Riksbank have written a paper looking at the technique used in the middle ages known in Latin as "Renovatio Monetae" or "recoinage." Mr. Westermark presented the idea at an economic conference in Mannheim, Germany this week.

Back in the middle ages, the ruling authority, for example a Bishop in a German city, needed to raise money. To do so, he would require his subjects to hand in their coin currency. By a certain date, coins would have to be turned in and replaced with a new set of coins. But here is the catch, they wouldn't be accepted 1-to-1. The subject would hand in four old coins, which would be replaced by three.

Using a model, the researchers concluded that such a trick would cause prices to rise until the point that the tax was levied, after which the prices would fall.

"When the government levies the tax private money holdings are reduced which in turn lead to a reduction in the price level. When the government spends the money this is transferred to the private sector through firm profits, leading to an increase in their money holdings and in turn the price level," Mr. Westermark explained.

In the model, the authority is able to re-mint the coins into new ones without cost, allowing them to be put to use--though Mr. Westermark concedes that in reality it might be costly to remind coins.

This is exactly as if the ECB were to announce that as of a certain date all EUR5 notes had to be handed in, but for every EUR20 given to the ECB only EUR15 would be returned to consumers in new notes.

The idea is similar to a "Gesell tax", named after the eccentric 19th and early 20th century German economist Silvio Gesell, whereby to retain its value holders of bank notes would have to buy stamps to place on the note.

This November the ECB is going to introduce a new EUR20 banknote. It could be a perfect opportunity for the central bank's president, Mario Draghi, to try something new or, in this case, very old.

Write to Todd Buell at todd.buell@wsj.com

(END) Dow Jones Newswires

August 28, 2015 04:33 ET (08:33 GMT)