Monetary Regimes and Trade before the Classical Gold Standard: Evidence from the Latin Monetary Union

Jacopo Timini

Papers from arXiv.org

Abstract: This paper reexamines the trade effects of the Latin Monetary Union (LMU), a 19th century agreement to standardize gold and silver coinage among several European countries. The LMU provides a useful setting for studying whether monetary arrangements fostered trade before the classical gold standard, when gold, silver, bimetallic, and paper regimes coexisted. Because some countries already shared other monetary standards, treating all non-member pairs as a single control group mixes pairs with and without alternative forms of monetary coordination. I classify pairs by standard and estimate the LMU effect relative to pairs without a common standard, bringing the comparison closer to those used in the literature on the gold standard and contemporary currency unions. The results suggest that the LMU increased trade between its members by approximately 30\% during its early years, when bimetallism was still credible. These effects subsequently faded, converging to zero by the end of the 1870s. More broadly, these findings also highlight the importance of accounting for the existing monetary regimes when estimating the trade effects of other international policies.

Date: 2025-10, Revised 2026-09
New Economics Papers: this item is included in nep-fdg, nep-his, nep-int, nep-mon and nep-pay
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