Working Paper: NBER ID: w16092
Authors: Zheng Xueyi; Yaguang Zhang; John Whalley
Abstract: We discuss monetary thought in ancient China from the perspective of Western monetary theory. It sets out the structure of economic activity in the various dynasties of ancient China and emphasizes the differences in monetary structure from Europe (and later North America). Imperial China was a politically integrated structure with regional segmentation of economic activities and hence with regional money. Monetary policy was one body conducted at regional level, but overseen naturally politically before national integration under the Ming dynasty (14th century). In various regions different forms of money circulated, with gold, silver, copper, and paper all present at various times. Monetary policy was guided by monetary thought, such as later in Europe. Basic concepts such as monetary function, the velocity of circulation, inflation, interest rate parity and the quantity theory were all present. The economics of Imperial China witnessed boom and bust, inflation and deflation and monetary control much like Europe to follow. Monetary thought thus seemingly preceded Western thought, and had remarkable similarities. Whether much of this thought travelled down the silk road remains unknown, but the possibility is intriguing.
Keywords: Monetary Theory; Chinese Economic Thought; Western Economic Theory
JEL Codes: N20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Ancient Chinese monetary thought (E42) | Conceptual foundations of monetary policy (E52) |
| Political structures, economic needs, and philosophical traditions (P19) | Ancient Chinese monetary thought (E42) |
| Monetary diversity (E42) | Complex monetary policies (E63) |
| Economic fluctuations (boom and bust cycles) (E32) | Development of monetary thought (E40) |
| Ancient Chinese monetary thought (E42) | Western monetary systems (E42) |