A History of Monetary Unions

A History of Monetary Unions

A History of Monetary Unions

A History of Monetary Unions


In this comprehensive historical overview, the author writes about monetary unions with an admirable completeness and covers such themes as: the gold standard, monetary unions in countries and areas from Latin America to The British Empire, and the EMU and its policy ramifications.


The main theme of this book is monetary unions, how they are created, and how they fall apart. The first six chapters set out the main principles of various types of international monetary arrangements, briefly citing examples which are to be discussed in more detail. There is a range of economic literature discussing the principles in great depth. I have not attempted to compete with this, but rather to illustrate the great range of examples.

There are two main types of monetary union. 'Type 1' monetary unions are between countries on a gold (or silver) standard, with each currency defined in terms of gold (or silver) meaning that exchange rates are already fixed. The collapse of bimetallism, an early 'monetary disunion', confirms that even metallic currencies have their 'exchange rate' problems.

'Type 2' unions are more interesting, where the countries would otherwise have independent monetary policies based on inconvertible fiat currencies: these can be subdivided according to whether or not exchange controls restrict the free flow of capital.

Many 'monetary unions' were simply a reaction to political change, as countries were linked by marriage or conquest, or achieved independence. There are also many examples of countries adopting the trusted currency of a neighbour: what we would now call 'dollarisation'.

Monetary union after the Napoleonic Wars

The concept of 'monetary union' becomes much more interesting when coins (or banknotes convertible into metal) of a particular value are precisely defined by a given weight and fineness of gold or silver.

After the Napoleonic Wars (which themselves included some of the more important early experiments with inconvertible paper currency) there were major type 1 monetary unions within Europe. There were also disunions, such as when the former Spanish empire in Latin America fell apart, and where other newly independent countries followed a wide variety of monetary policies. . .

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