A model of bimetallism
AbstractBimetallism has been the subject of considerable debate: Was it a viable monetary system? Was it a desirable system? In our model, the (exogenous and stochastic) amount of each metal can be split between monetary uses to satisfy a cash-in-advance constraint, and nonmonetary uses in which the stock of uncoined metal yields utility. The ratio of the monies in the cash-in-advance constraint is endogenous. Bimetallism is feasible: we find a continuum of steady states (in the certainty case) indexed by the constant exchange rate of the monies; we also prove existence for a range of fixed exchange rates in the stochastic version. Bimetallism does not appear desirable on a welfare basis: among steady states, we prove that welfare under monometallism is higher than under any bimetallic equilibrium. We compute welfare and the variance of the price level under a variety of regimes (bimetallism, monometallism with and without trade money) and find that bimetallism can significantly stabilize the price level, depending on the covariance between the shocks to the supplies of metals.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-98-8.
Date of creation: 1998
Date of revision:
Contact details of provider:
Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834
Web page: http://www.chicagofed.org/
More information through EDIRC
Other versions of this item:
- NEP-ALL-1998-11-20 (All new papers)
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.:
- Thomas J. Sargent & Francois R. Velde, 1997.
"The big problem of small change,"
Working Paper Series, Macroeconomic Issues
WP-97-08, Federal Reserve Bank of Chicago.
- Dowd, Kevin, 1996. "The Analytics of Bimetallism," The Manchester School of Economic & Social Studies, University of Manchester, vol. 64(3), pages 281-97, September.
- Angela Redish, 1995. "The persistence of bimetallism in nineteenth-century France," Economic History Review, Economic History Society, vol. 48(4), pages 717-736, November.
- 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.
- 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.
- Stefan E. Oppers, 1995.
"A Model of the Bimetallic System,"
IMF Working Papers
95/144, International Monetary Fund.
- Chau-nan Chen, 1972. "Bimetallism: Theory and Controversy in Perspective," History of Political Economy, Duke University Press, vol. 4(1), pages 89-112, Spring.
- Garber, Peter M, 1986. "Nominal Contracts in a Bimetallic Standard," American Economic Review, American Economic Association, vol. 76(5), pages 1012-30, December.
- Sargent, Thomas J. & Wallace, Meil, 1983.
"A model of commodity money,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 163-187.
- Friedman, Milton, 1990. "The Crime of 1873," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1159-94, December.
- Oppers, Stefan Erik, 1996.
"Was the worldwide shift to gold inevitable? An analysis of the end of bimetallism,"
Journal of Monetary Economics,
Elsevier, vol. 37(1), pages 143-162, February.
- Oppers, S.E., 1994. "Was the Worldwide Shift to Gold Inevitable? An Analysis of the End pf Bimetalism," Working Papers 351, Research Seminar in International Economics, University of Michigan.
- 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.
- C. C. Patterson, 1972. "Silver Stocks and Losses in Ancient and Medieval Times," Economic History Review, Economic History Society, vol. 25(2), pages 205-233, 05.
- Redish, Angela & Weber, Warren E., 2011.
"Coin Sizes And Payments In Commodity Money Systems,"
Cambridge University Press, vol. 15(S1), pages 62-82, April.
- Angela Redish & Warren E. Weber, 2008. "Coin sizes and payments in commodity money systems," Working Papers 658, Federal Reserve Bank of Minneapolis.
- Angela Redish & Warren E. Weber, 2008. "Coin sizes and payments in commodity money systems," Staff Report 416, Federal Reserve Bank of Minneapolis.
- Angela Redish & Warren E. Weber, 2011. "A model of commodity money with minting and melting," Staff Report 460, Federal Reserve Bank of Minneapolis.
- Newby, E., 2008.
"The Suspension of the Gold Standard as Sustainable Monetary Policy,"
Cambridge Working Papers in Economics
0856, Faculty of Economics, University of Cambridge.
- Newby, Elisa, 2012. "The suspension of the gold standard as sustainable monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1498-1519.
- Elisa Newby, 2009. " The Suspension of the Gold Standard as Sustainable Monetary Policy," CDMA Conference Paper Series 0907, Centre for Dynamic Macroeconomic Analysis.
- 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.
- Elisa Newby, 2007. "Macroeconomic Implications of Gold Reserve Policy of the Bank of England during the Eighteenth Century," CDMA Working Paper Series 200708, Centre for Dynamic Macroeconomic Analysis.
- William Roberds & Stephen Quinn, 2005.
"The Big Problem of Large Bills: The Bank of Amsterdam and the Origins of Central Banking,"
2005 Meeting Papers
318, Society for Economic Dynamics.
- Stephen Quinn & William Roberds, 2005. "The big problem of large bills: the Bank of Amsterdam and the origins of central banking," Working Paper 2005-16, Federal Reserve Bank of Atlanta.
- Diebolt, Claude & Parent, Antoine, 2008. "Bimetallism: The "rules of the game"," Explorations in Economic History, Elsevier, vol. 45(3), pages 288-302, July.
- Bojanic, Antonio N., 2011. "Final Years of the Silver Standard in Mexico: Evidence of Purchasing Power Parity with The United States," MPRA Paper 45535, University Library of Munich, Germany, revised 27 Jul 2011.
- Kahn, Charles M. & Roberds, William, 2009. "Why pay? An introduction to payments economics," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 1-23, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores).
If references are entirely missing, you can add them using this form.