Money, real interest rates, and output: a reinterpretation of postwar U.S. data

Robert Litterman and Laurence Weiss ()

No 89, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: The claim that bad money drives out good is one of the oldest and most cited in economics. Economists refer to this claim as Gresham?s law. Yet despite its seemingly universal acceptance, this claim does not warrant its status as a law. We find it has no convincing explanations and many overlooked exceptions. We propose an alternative hypothesis based on the costs of using a medium of exchange at a nonpar price: small-denomination currency undervalued at the mint tends to disappear from circulation while large-denomination currency usually circulates at premium. Examining a variety of historical episodes when market and legal prices were different, we find our ?law? can explain history much better than Gresham?s.

Date: 1984
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://www.minneapolisfed.org/research/sr/sr89.pdf Full Text (application/pdf)

Related works:
Journal Article: Money, Real Interest Rates, and Output: A Reinterpretation of Postwar U.S. Data (1985)
Working Paper: Money, Real Interest Rates, and Output: A Reinterpretation of Postwar U.S. Data (1983)
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:fip:fedmsr:89

Access Statistics for this paper

More papers in Staff Report from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Kate Hansel ().