Discussion paper

DP12583 Money and Monetary Stability in Europe, 1300-1914

This paper investigates the determinants of monetary stability in Europe from the late medieval era until World War I. Through this period, the nominal anchor for monetary policy was the silver/gold equivalent of the monetary unit. States, however, frequently abandoned this anchor, some depreciating their monetary units against silver/gold less than 10 times and others more than 10,000 times between 1500 and 1914. To document patterns of monetary stability and put alternative theories of stability to test, we compile a new data set of silver/gold equivalents of monetary units for all major European states. We find strong support for political and fiscal theories arguing that states with weak executive constraints and intermediate levels of fiscal capacity had less stable monetary units. In contrast, the empirical support for monetary theories emphasizing the mechanics of the monetary system is weak. These findings support the primacy of political and fiscal factors over mechanical factors for monetary stability.


Pamuk, S, K Karaman and S Yıldırım-Karaman (2018), ‘DP12583 Money and Monetary Stability in Europe, 1300-1914‘, CEPR Discussion Paper No. 12583. CEPR Press, Paris & London. https://cepr.org/publications/dp12583