Gresham's Law Regained
AbstractIt has been argued that Gresham's Law, bad money (money with a low value in non-monetary uses) drives out good, often fails because one money can circulate at its market value. Various cases involving the U.S. dollar in the nineteenth century have been cited as possible violations of the law resulting from nonpar circulation of the dollar. This paper analyzes these cases, and finds to the contrary that a "93 percent version" of Gresham's law held in all them. Evidently, there were high transactions costs associated with using good money at a premium or bad money at a discount.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Historical Working Papers with number 0035.
Date of creation: Jan 1992
Date of revision:
Publication status: published as "Gresham's Law in Nineteenth-Century America, Journal of Money, Creditand Banking, 27 (4), November 1995, Part 1, pp. 1084-1098
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- Klein, Benjamin, 1974. "The Competitive Supply of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(4), pages 423-53, November.
- Friedman, Milton, 1990. "Bimetallism Revisited," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 85-104, Fall.
- Stefan E. Oppers, 1995.
"A Model of the Bimetallic System,"
IMF Working Papers
95/144, International Monetary Fund.
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