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A Model of Bimetallism

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Author Info
Francois R. Velde
Warren E. Weber

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Abstract

Bimetallism has been the subject of considerable debate: Was it a viable monetary system? Was it desirable? In our model, the amounts of each metal are split between coined metal, satisfying a cash-in-advance constraint, and uncoined metal, yielding utility. The ratio of the monies in the cash-in-advance constraint is endogenous. Bimetallism is feasible: we find a continuum of steady states indexed by the constant exchange rate of the monies. Bimetallism is not desirable: among steady states, welfare under monometallism is higher than under any bimetallic equilibrium. Long-run trends in gold and silver production placed limits on the maintenance of bimetallism at any given ratio, but its sudden collapse in 1873 remains a puzzle.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 108 (2000)
Issue (Month): 6 (December)
Pages: 1210-1234
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Handle: RePEc:ucp:jpolec:v:108:y:2000:i:6:p:1210-1234

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Flandreau, Marc, 1995. "An Essay on the Emergence of the International Gold Standard, 1870-80," CEPR Discussion Papers 1210, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Friedman, Milton, 1990. "The Crime of 1873," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1159-94, December. [Downloadable!] (restricted)
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  3. Dowd, Kevin, 1996. "The Analytics of Bimetallism," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 64(3), pages 281-97, September.
  4. Thomas J. Sargent & Neil Wallace, 1983. "A model of commodity money," Staff Report 85, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  5. Redish, Angela, 1990. "The Evolution of the Gold Standard in England," The Journal of Economic History, Cambridge University Press, vol. 50(04), pages 789-805, December. [Downloadable!]
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  6. Kareken, John & Wallace, Neil, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 207-22, May. [Downloadable!] (restricted)
  7. Garber, Peter M, 1986. "Nominal Contracts in a Bimetallic Standard," American Economic Review, American Economic Association, vol. 76(5), pages 1012-30, December. [Downloadable!] (restricted)
  8. Friedman, M., 1989. "Bimetallism Revisited," Papers e-89-24, Stanford - Hoover Institution.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Elisa Newby, 2007. " Macroeconomic Implications of Gold Reserve Policy of the Bank of England during the Eighteenth Century," CDMA Working Paper Series 0708, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
  2. Angela Redish & Warren E. Weber, 2008. "Coin sizes and payments in commodity money systems," Working Papers 658, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  3. Antoine Martin, 2002. "Reconciling Bagehot with the Fed's response to Sept. 11," Research Working Paper RWP 02-10, Federal Reserve Bank of Kansas City. [Downloadable!]
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