Pre-Industrial Bimetallism: The Index Coin Hypothesis

37 Pages Posted: 5 May 2009

See all articles by Ernst Juerg Weber

Ernst Juerg Weber

The University of Western Australia - UWA Business School

Date Written: May 4, 2009

Abstract

In early monetary systems the unit of account was separate from the medium of exchange. Commodity prices and prices of coins were quoted in terms of a fixed quantity of metal that was embodied by an 'index coin'. Coins circulated at their metal value because coinage was imperfect and fixed exchange rates would have interfered with the operation of bimetallism. An indication that the exchange rates of coins were market determined is the absence of value marks on coins. During the Industrial Revolution, improvements in the quality of coinage led to the fusion of the unit of account and medium of exchange function of money. As a consequence, pre-industrial bimetallism gave way to nineteenth century bimetallism, in which the make of currencies alternated between silver and gold.

Keywords: Unit of account, monetary standard, bimetallism, coins

JEL Classification: E31, E42, N10, N20

Suggested Citation

Weber, Ernst Juerg, Pre-Industrial Bimetallism: The Index Coin Hypothesis (May 4, 2009). Available at SSRN: https://ssrn.com/abstract=1399196 or http://dx.doi.org/10.2139/ssrn.1399196

Ernst Juerg Weber (Contact Author)

The University of Western Australia - UWA Business School ( email )

Crawley, WA 6009
Australia

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