Commodity and Token Monies

Thomas Sargent

The Economic Journal, 2019, vol. 129, issue 619, 1457-1476

Abstract: A government defines a dollar as a list of quantities of one or more precious metals. If issued in limited amounts, token money is a perfect substitute for precious metal money. Atemporal equilibrium conditions determine how quantities of precious metals and token monies affect an equilibrium price level. Within limits, a government can peg the relative price of two precious metals, confirming Fisher's (1911) response to a classic criticism of bimetallism. Monometallism dominates bimetallism according to a natural welfare criterion.

Date: 2019
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