The Economics of International Monies

Gerald P. Dwyer Jr. and James R. Lothian
Working Paper 2003-37
December 2003

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The economics of international monies is likely to be informative about the future of the euro. The authors summarize the history of international monies, from the gold solidus introduced in the fourth century to the present. They identify four common characteristics of these currencies: high unitary value; relatively low inflation rates; issuance by major economic and trading powers; and spontaneous, as opposed to planned, adoption. Recent theoretical literature supports the importance of the characteristics, while recent theories’ common implication of multiple equilibria supports the importance of spontaneous adoption as developed by Menger and Hayek.

JEL classification: E42, F33, N10

Key words: monetary history, international money, gold coinage

The authors thank Sven Arndt, Benjamin J. Cohen, and George von Furstenberg for comments on earlier drafts of this paper and Linda Mundy for editorial assistance. This paper is a revised version of Dwyer and Lothian (2003). 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.

Please address questions regarding content to Gerald P. Dwyer Jr., Vice President, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, NE, Atlanta, GA 30309-4470, 404-498-7095,, or James R. Lothian, Distinguished Professor of Finance, Schools of Business, Fordham University, 113 West 60th Street, New York, NY 10023, 212-636-6147,