The Silver Standard as a discipline on money over-issuance: The mechanism of paper money in Yuan China

Hanhui Guan () and Jie Mao ()
Additional contact information
Hanhui Guan: Peking University
Jie Mao: University of International Business & Economics China

No 18013, Working Papers from Economic History Society

Abstract: "The Yuan was the first dynasty both in Chinese and world history to use paper money as its sole medium of circulation, and also established the earliest silver standard. This paper explores the impact of paper money in Yuan China. We find that: (1) At the beginning of its regime, due to the strict constraints of the silver standard on money issuances, the value of paper money was stable. (2) Since the middle stage of the dynasty, the central government had to finance fiscal deficits by issuing more paper money, and inflation was thus unavoidable. Our empirical results also demonstrate that fiscal pressure from multiple provincial rebellions was the most important factor driving the government to issue more paper money; however, the emperor’s largesse, which had been viewed as another source of fiscal deficits by most traditional historians, had no significant effect on the over-issuance of paper money. (3) When the monetary standard switched from silver to paper money, the impact of fiscal deficits, which were driving more paper money issuances, became much more severe. Based on these findings, we argue that the experience of Yuan China verified that metal standards could serve as a discipline on paper money over-issuances. This episode in Yuan China predates the money over-issuances observed during the era of the classic gold standard found in western countries by six centuries."

Keywords: "silver standard; money over-issuance; paper money; convertibility; Yuan China" (search for similar items in EconPapers)
JEL-codes: E42 N15 N45 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-cna, nep-his, nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ehs.org.uk/dotAsset/232d42f2-746b-4ab3-b7ed-556feb0b825d.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ehs.org.uk/dotAsset/232d42f2-746b-4ab3-b7ed-556feb0b825d.pdf [301 Moved Permanently]--> https://ehs.org.uk/dotAsset/232d42f2-746b-4ab3-b7ed-556feb0b825d.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehs:wpaper:18013

Access Statistics for this paper

More papers in Working Papers from Economic History Society Contact information at EDIRC.
Bibliographic data for series maintained by Chair Public Engagement Committe (currently David Higgins - Newcastle) ().