 Pulling up the tarnished anchor: The end of silver as a global unit of accountRicardo Fernholz, Kris James Mitchener and Marc Weidenmier Journal of International Money and Finance, 2017, vol. 74, issue C, 209-228 Abstract: We use the demise of silver-based standards in the 19th century to explore price dynamics when a commodity-based money ceases to function as a global unit of account. We develop a general equilibrium model of the global economy with gold and silver money. Calibration of the model shows that silver ceased functioning as a global price anchor in the mid-1890s—the price of silver is positively correlated with agricultural commodities through the mid-1890s, but not thereafter. In contrast to Fisher (1911) and Friedman (1990), both of whom predict greater price stability under bimetallism, our model suggests that a global bimetallic system, in which the gold price of silver fluctuates, has higher price volatility than a global monometallic system. We confirm this result using agricultural commodity price data for 1870–1913. Keywords: Bimetallism; Classical gold standard; Silver; Unit of account; Fixed exchange rates (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:74:y:2017:i:c:p:209-228 DOI: 10.1016/j.jimonfin.2017.03.010 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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