Working Paper: CEPR ID: DP9300
Authors: Pilar Nogues-Marco
Abstract: This article analyzes the stability of bimetallism for countries operating in integrated bullion markets who enact different legal ratios. I articulate a new theoretical framework to demonstrate that two countries can both be bimetallic only if they coordinate their legal ratios. The theoretical framework is applied to the mid-18th century when London?s legal ratio was 3.8% higher than that of Amsterdam. I find that Amsterdam was effectively on the bimetallic standard, whereas London was on a de facto gold standard.
Keywords: arbitrage; bimetallic stability; bullion market integration; melting; minting points; monetary policy; specie-point mechanism
JEL Codes: E42; F15; N13; N23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Differing legal ratios (London's being 38% higher than Amsterdam's) (K29) | Monetary standards in London (E42) |
| Differing legal ratios (London's being 38% higher than Amsterdam's) (K29) | Monetary standards in Amsterdam (E42) |
| Legal ratios (K13) | Market price ratios (G19) |
| Integration of bullion markets (G15) | Divergence in market behavior (G40) |
| Coordination of legal ratios (K41) | Maintenance of bimetallic standard (E42) |