Fiscal Dominance, Monetary Policy and Exchange Rates: Lessons from Early-Modern Venice

Donato Masciandaro (), Davide Romelli () and Stefano Ugolini ()
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Donato Masciandaro: Department of Economics, Bocconi University
Davide Romelli: Department of Economics, Trinity College Dublin
Stefano Ugolini: Department of Economics, Universit' Toulouse Capitole

No tep1124, Economic Papers from Trinity College Dublin, Economics Department

Abstract: This paper focuses on an early unique experiment of freely floating State-issued money, implemented in Venice between 1619 and 1666. Building on a new hand-collected database from a previously unexplored archival source, we show that, despite the Venetian ducat's status as an international currency and the government's reputation for fiscal prudence, its external value was significantly, and increasingly, affected by episodes of automatic government deficit monetization through the Banco del Giro during the crises of 1630 (outbreak of the bubonic plague) and 1648-50 (escalation of the Cretan War). This suggests that the institutional context plays an important role in the transmission mechanism between government deficit monetization and exchange rates.

Keywords: Fiscal Dominance; Monetary Policy; Early Modern Venice; Banco del Giro; Fiat Money; Deficit Monetization; Historical Exchange Rates (search for similar items in EconPapers)
JEL-codes: E63 F31 N33 N43 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2024-09
New Economics Papers: this item is included in nep-fdg, nep-his, nep-mon, nep-opm and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep1124

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