DP9300 Competing Bimetallic Ratios: Amsterdam, London and Bullion Arbitrage in the Mid-18th Century
|Publication Date:||January 2013|
|Keyword(s):||arbitrage, bimetallic stability, bullion market integration, melting-minting points, monetary policy, specie-point mechanism|
|JEL(s):||E42, F15, N13, N23|
|Programme Areas:||Economic History|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=9300|
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.