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Money and Monetary Stability in Europe, 1300-1914

Author

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  • Karaman, Kivanç
  • Pamuk, Sevket
  • Yildirim, Secil

Abstract

This paper investigates the determinants of monetary stability in Europe from the late medieval era until World War I. Through this period, the nominal anchor for monetary policy was the silver/gold equivalent of the monetary unit. States, however, frequently abandoned this anchor, some depreciating their monetary units against silver/gold less than 10 times and others more than 10,000 times between 1500 and 1914. To document patterns of monetary stability and put alternative theories of stability to test, we compile a new data set of silver/gold equivalents of monetary units for all major European states. We find strong support for political and fiscal theories arguing that states with weak executive constraints and intermediate levels of fiscal capacity had less stable monetary units. In contrast, the empirical support for monetary theories emphasizing the mechanics of the monetary system is weak. These findings support the primacy of political and fiscal factors over mechanical factors for monetary stability.

Suggested Citation

  • Karaman, Kivanç & Pamuk, Sevket & Yildirim, Secil, 2018. "Money and Monetary Stability in Europe, 1300-1914," CEPR Discussion Papers 12583, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12583
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    References listed on IDEAS

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    Cited by:

    1. Irigoin, Alejandra, 2018. "Global silver: Bullion or Specie? Supply and demand in the making of the early modern global economy," MPRA Paper 88859, University Library of Munich, Germany.

    More about this item

    Keywords

    depreciation; fiat standard; fiscal capacity; gold standard; money; price stability; silver standard;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N43 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: Pre-1913
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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