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The Big Problem of Large Bills: The Bank of Amsterdam and the Origins of Central Banking


  • William Roberds

    () (Research Department Federal Reserve Bank of Atlanta)

  • Stephen Quinn


This paper outlines a model of the first true central bank, the Bank of Amsterdam, founded in 1609. Employing a variant of the Freeman (1996) model of money and payments, we first analyze the problematic monetary situation in the Netherlands prior to the founding of the Bank. We then use the model to describe how the Bank could remedy this situation by creating a stable medium for the settlement of commercial obligations.
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Suggested Citation

  • 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.
  • Handle: RePEc:red:sed005:318

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    References listed on IDEAS

    1. Fujiki, Hiroshi, 2003. "A model of the Federal Reserve Act under the international gold standard system," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1333-1350, September.
    2. Francois R. Velde & Warren E. Weber, 2000. "A Model of Bimetallism," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1210-1234, December.
    3. Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, vol. 86(5), pages 1126-1138, December.
    4. de Vries,Jan & van der Woude,Ad, 1997. "The First Modern Economy," Cambridge Books, Cambridge University Press, number 9780521570619, March.
    5. Ruilin Zhou, 2000. "Understanding intraday credit in large-value payment systems," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 29-44.
    6. Sargent, Thomas J. & Wallace, Meil, 1983. "A model of commodity money," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 163-187.
    7. Arthur J. Rolnick & Francois R. Velde & Warren E. Weber, 1997. "The debasement puzzle: an essay on medieval monetary history," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 8-20.
    8. Sussman, Nathan & Zeira, Joseph, 2003. "Commodity money inflation: theory and evidence from France in 1350-1436," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1769-1793, November.
    9. Charles Goodhart, 1988. "The Evolution of Central Banks," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570734, January.
    10. de Vries,Jan & van der Woude,Ad, 1997. "The First Modern Economy," Cambridge Books, Cambridge University Press, number 9780521578257, March.
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    Cited by:

    1. Orphanides, Athanasios, 2013. "Is monetary policy overburdened?," IMFS Working Paper Series 75, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    2. Calomiris, Charles W. & Flandreau, Marc & Laeven, Luc, 2016. "Political foundations of the lender of last resort: A global historical narrative," Journal of Financial Intermediation, Elsevier, vol. 28(C), pages 48-65.
    3. Stephen F. Quinn & William Roberds, 2006. "An economic explanation of the early Bank of Amsterdam, debasement, bills of exchange, and the emergence of the first central bank," FRB Atlanta Working Paper 2006-13, Federal Reserve Bank of Atlanta.
    4. Norman, Ben & Shaw, Rachel & Speight, George, 2011. "The history of interbank settlement arrangements: exploring central banks’ role in the payment system," Bank of England working papers 412, Bank of England.

    More about this item


    Central banking; commodity money; debasement;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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