A Policy Framework for the Bank of Amsterdam, 1736–1791

Abstract

This article describes and measures how the Bank of Amsterdam supplied a successful fiat money in a world of specie by offering the unlimited repo of large coins at a near-zero rate. Our data from 1736 to 1791 finds that such liberal access led to volatile loan levels and that the Bank responded with sterilization by means of open market operations. In this way, the Bank held its money stock at a roughly constant level and helped stabilize its value. Profit was another part of the Bank’s policy framework, and the pursuit of seigniorage eventually compromised stabilization.