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© 2022 International Monetary Fund
WP/22/119
IMF Working Paper
Strategy, Policy and Review Department
Pictures of a Revolution: Analyzing the Transition from Global Bimetallism to the Gold Standard in the 1860s and 1870s
Prepared by Johannes Wiegand*
June 2022
Approved by Stephan Danninger
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: In the early 1870s, the global monetary system transitioned from bimetallism—a regime in which gold and silver currencies were tied at quasi-fixed exhange ratios—to the gold standard that was characterized by the use of (only) gold as the main currency metal by the largest and most advanced economies. The transition ocurred against the backdrop of both large supply shifts in global bullion markets in the 1850s and 60s and momentous political events, such as the Franco-Prussian war of 1870/71 and the subsequent foundation of the German empire. The causes for the transition have long been a matter of intense debate. This article discusses three separate but interrelated issues: (i) assessing the robustness of the pre-1870 bimetallic system to shocks—which includes a discussion of the appropriate use of Flandreau’s (1996) reference model; (ii) analyzing the transition from bimetallism to gold as a multi-stage currency game played by France and Germany; and (iii) evaluating the monetary debates at the German Handelstag conferences in the 1860s, to present a more complete narrative of the German discussion in the run-up to the transition.
| JEL Classification Numbers: | C51, C72, E42, F33, N13 |
| Keywords: | Bimetallism, Gold Standard, France, Germany |
| Author’s E-Mail Address: | jwiegand@imf.org |
| JEL Classification Numbers: | C51, C72, E42, F33, N13 |
| Keywords: | Bimetallism, Gold Standard, France, Germany |
| Author’s E-Mail Address: | jwiegand@imf.org |
Title Page
WORKING PAPERS
Pictures of a Revolution: Analyzing the Transition from Global Bimetallism to the Gold Standard in the 1860s and 1870s
Prepared by Johannes Wiegand
Contents
I. Introduction and Overview
II. Use and Misuse of Flandreau’s (1996) Model of the Global Bimetallic System
Stocks versus Flows
Meissner’s (2015) Approach
So, How Robust Was Bimetallism?
III. What a Game! The Transition as a French-German Currency Game from the 1850s to the Early 1870s
Stage I: Stable Bimetallism (the 1850s and early 1860s)
Stage II: French Deterrence (the late 1860s)
Stage III: First-Mover Advantage with Germany (the early 1870s)
Stage IV: France’s Response (1873/74 and beyond)
Could Bimetallism Have Been Resurrected?
IV. The Monetary Debates at the German Handelstag Assemblies in the 1860s
The 1861 Handelstag
The 1865 Handelstag
The 1868 Handelstag
V. Main Conclusions
References
FIGURES
1. Estimating Specie Demand
2. Gold Share and Bimetallism’s Structural Limits
3. Actual and Predicted Specie Holdings in France, 1850–70
4. Specie Demand: Meissner’s Approach
5. Assessing Bimetallism’s Robustness with Meissner’s Approach
6. Bimetallism’s Robustness to Currency Reforms
7. Share of Silver Coins in France’s Specie Circulation, 1849–73
8. Currency Regime Preferences at the 1868 Handelstag