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Gresham's Law Regained

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  • Robert L. Greenfield

Abstract

It 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.

Suggested Citation

  • Robert L. Greenfield, 1992. "Gresham's Law Regained," NBER Historical Working Papers 0035, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberhi:0035
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    File URL: http://www.nber.org/papers/h0035.pdf
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    References listed on IDEAS

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    1. Klein, Benjamin, 1974. "The Competitive Supply of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(4), pages 423-453, November.
    2. Friedman, Milton, 1990. "Bimetallism Revisited," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 85-104, Fall.
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    Cited by:

    1. Oppers, Stefan Erik, 2000. "A model of the bimetallic system," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 517-533, October.

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