A Model of Bimetallism
AbstractBimetallism 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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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 108 (2000)
Issue (Month): 6 (December)
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