CRIF Working Paper No. 03002

The Economics of International Monies

Title: The Economics of International Monies

Author: James R. Lothian (Fordham University) and Gerald P. Dwyer Jr. (The Federal Reserve Bank of Atlanta)

Contact: lothian@fordham.edu 

JEL Classification: E42, F33, N10

Abstract: The purpose of this paper is to examine the history of international monies and the theory related to their adoption and use. We summarize the history of international monies, beginning with a discussion of the gold solidus introduced in the fourth century by the Emperor Constantine, continuing with the currencies of the Italian city states and ending with the currencies that have functioned as international monies from the early modern period to the present. We identify four key characteristics of these currencies: high unitary value; relatively low inflation rates for long periods; issuance by major economic and trading powers; and spontaneous, as opposed to planned, adoption internationally. We conclude with a theoretical discussion of these common characteristics that explains much of this history.   

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