Death of a Reserve Currency

55 Pages Posted: 4 Apr 2015

See all articles by Stephen Quinn

Stephen Quinn

Texas Christian University - Department of Economics

William Roberds

Federal Reserve Bank of Atlanta

Date Written: September 1, 2014

Abstract

The Dutch bank florin was the dominant currency in Europe during much of the 17th and 18th centuries. The florin, a fiat money, was managed by an early central bank, the Bank of Amsterdam. Using a new reconstruction of the Bank of Amsterdam's balance sheet, we analyze the florin's loss of reserve currency status during the period 1781–92. The reconstruction shows that by 1784, accommodative policies rendered the Bank of Amsterdam "policy insolvent," meaning that its net worth would have been negative under continuation of its policy objectives. Policy insolvency coincided with the Bank of Amsterdam's loss of control over the value of its money.

Keywords: central banks, reserve currency, policy insolvency

JEL Classification: E58, F33, N13

Suggested Citation

Quinn, Stephen and Roberds, William, Death of a Reserve Currency (September 1, 2014). FRB Atlanta Working Paper No. 2014-17, Available at SSRN: https://ssrn.com/abstract=2580450 or http://dx.doi.org/10.2139/ssrn.2580450

Stephen Quinn

Texas Christian University - Department of Economics ( email )

Fort Worth, TX 76129
United States

William Roberds (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8970 (Phone)
404-498-8956 (Fax)

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