Working Paper: NBER ID: w20852
Authors: Christopher M. Meissner
Abstract: Bimetallism disappeared as a monetary regime in the 1870s. Flandreau (1996) clearly demonstrates that French bimetallism would have been able to withstand the German de-monetization of silver. Could it have withstood if many other countries in the world moved to the gold standard following in the footsteps of Bismarck? The answer is no. By 1875 bimetallism would have been unviable, and the US return to convertibility in 1879 would have made it impossible to sustain true bimetallism. It is difficult to understand the end of the bimetallic strategy as the outcome of a repeated game between rational actors. Rather, it would appear that very few actors had a good model of how the international monetary system worked in practice as of 1873. An attempt to resuscitate bimetallism, with France and the US both bimetallic at the mint ratio of 15.5 to one, would have been tenuous. No wonder then that there were few countries enthusiastic about reviving bimetallism at the International Monetary Conference of 1878. A similar lack of cooperation risks sending the European Monetary Union-as currently constituted-the way of bimetallism.
Keywords: bimetallism; gold standard; international monetary system
JEL Codes: E42; N10; N40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Germany's demonetization of silver in 1872 (N13) | France limiting silver coinage in 1873 (N13) |
| France limiting silver coinage in 1873 (N13) | Impact on gold circulation (F69) |
| International shift to the gold standard (F33) | France misperceiving viability of bimetallism (N13) |
| France misperceiving viability of bimetallism (N13) | Permanent suspension of silver coinage in 1876 (E42) |
| If France eliminated quantitative restrictions on silver coinage after 1875 (N13) | Complete drain on gold circulation (E50) |
| U.S. and France not able to resuscitate bimetallism in 1878 (F33) | Economically infeasible to revive bimetallism (N11) |