DP13652 Monetary Systems and the Global Balance-of-Payments Adjustment in the Pre-Gold Standard Period, 1700-1870

Author(s): Rui Esteves, Pilar Nogues-Marco
Publication Date: April 2019
Keyword(s): Balance of Payments, Monetary Systems, Price-specie flow mechanism, Real effective exchange rates (REERs)
JEL(s): E42, F31, N10
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13652

We divide this paper into four sections. The first section outlines the taxonomy of commodity-based monetary regimes in Europe and their advantages and costs. The second section describes the main international monetary flows in the Early Modern period and relates them to East-West balance-of-trade adjustments and monetary systems in Asia (1700-1800). In the third section, we turn to the development of the foreign exchange market, which was mostly based on bills of exchange in this period. We explain the expansion of bills-of-exchange market from the European to the intercontinental network in the mid-19th century. The final section then investigates how nominal exchange rates and relative prices contributed to the global current account adjustments in the near pre-gold standard period (1820s-1870s).