The Bank of Amsterdam, founded in 1609, was the first public bank to offer accounts not directly convertible to coin. As such, it can be described as the first true central bank. The debut of central bank money did not result from any conscious policy decision, however, but instead arose almost by accident, in response to the chaotic monetary conditions during the early years of the Dutch Republic. This paper examines the history of this momentous development from the perspective of modern monetary theory.
JEL classification: E420, E520, N130
Key words: money, central banks, coinage, debasement
This paper was prepared for the conference on “The Origin and Development of Financial Markets and Institutions,” held in honor of the retirement of Professor Larry Neal, University of Illinois, April 28–29, 2006. The authors thank Jeremy Attack, Joost Jonker, Charles Kahn, Larry Neal, Francois Velde, and David Weiman for comments on an earlier draft, Oscar Gelderbloom for tips on numerous references, and especially M.S. Polak for sharing volume 2 of his book Historiografie En Economie Van De “Muntchaos.” The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.
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