A Model of Bimetallism

Francois Velde () and Warren Weber

Journal of Political Economy, 2000, vol. 108, issue 6, 1210-1234

Abstract: Bimetallism has been the subject of considerable debate: Was it a viable monetary system? Was it desirable? In our model, the amounts of each metal are split between coined metal, satisfying a cash-in-advance constraint, and uncoined metal, yielding utility. The ratio of the monies in the cash-in-advance constraint is endogenous. Bimetallism is feasible: we find a continuum of steady states indexed by the constant exchange rate of the monies. Bimetallism is not desirable: among steady states, welfare under monometallism is higher than under any bimetallic equilibrium. Long-run trends in gold and silver production placed limits on the maintenance of bimetallism at any given ratio, but its sudden collapse in 1873 remains a puzzle.

Date: 2000
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Related works:
Working Paper: A model of bimetallism (1998)
Working Paper: A model of bimetallism (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:v:108:y:2000:i:6:p:1210-1234

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