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A Model of the Bimetallic System

  • Oppers, S.E.

This paper formalizes Irving Fisher’s century-old model of bimetallism and adds the important “disequilibrium” dynamics to deal with the long periods during which bimetallic countries were on effective monometallic standards. It resolves a long standing puzzle in the bimetallic literature regarding the remarkable stability of the gold/silver price ratio in the nineteenth century by modeling the bimetallic mint ratio as a regulating barrier to the gold/silver price ratio. It thus provides a clean-cut example of a target-zone model that—in contrast to other such models in the literature—exhibits the main predicted nonlinearities in the data. This is a Paper on Policy Analysis and Assessment and the author(s) would welcome any comments on the present text. Citations should refer to a Paper on Policy Analysis and Assessment of the International Monetary Fund, mentioning the author(s) and the date of issuance. The views expressed are those of the author(s) and do not necessarily represent those of the Fund.

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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 332.

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Length: 34 pages
Date of creation: 1993
Date of revision:
Handle: RePEc:mie:wpaper:332
Contact details of provider: Postal: ANN ARBOR MICHIGAN 48109
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  1. Donald J. Mathieson & Robert P. Flood & Andrew K. Rose, 1991. "An Empirical Exploration of Exchange Rate Target-Zones," IMF Working Papers 91/15, International Monetary Fund.
  2. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
  3. Robert P. Flood & Peter M. Garber, 1982. "A model of stochastic process switching," International Finance Discussion Papers 201, Board of Governors of the Federal Reserve System (U.S.).
  4. Robert L. Greenfield, 1992. "Gresham's Law Regained," NBER Historical Working Papers 0035, National Bureau of Economic Research, Inc.
  5. Kenneth A. Froot & Maurice Obstfeld, 1989. "Exchange Rate Dynamics Under Stochastic Regime Shifts: A Unified Approach," NBER Working Papers 2835, National Bureau of Economic Research, Inc.
  6. Friedman, Milton, 1990. "Bimetallism Revisited," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 85-104, Fall.
  7. Rolnick, Arthur J & Weber, Warren E, 1986. "Gresham's Law or Gresham's Fallacy?," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 185-99, February.
  8. Miller, M. & Weller, P., 1988. "Solving Stochastic Saddlepoint Systems: A Qualitative Treatment With Economic Applications," The Warwick Economics Research Paper Series (TWERPS) 309, University of Warwick, Department of Economics.
  9. Lars E. O. Svensson, 1992. "An Interpretation of Recent Research on Exchange Rate Target Zones," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 119-144, Fall.
  10. Paul Krugman & Julio Rotemberg, 1990. "Target Zones with Limited Reserves," NBER Working Papers 3418, National Bureau of Economic Research, Inc.
  11. Arthur J. Rolnick & Warren E. Weber, 1986. "Gresham's law or Gresham's fallacy?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 17-24.
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