The origins of a paper money economy - the case of Norway

Lars Fredrik Øksendal
Additional contact information
Lars Fredrik Øksendal: Norwegian School of Economics and Business Administration (NHH)

No 2009/25, Working Paper from Norges Bank

Abstract: This article sketches the origins of paper money in Norway back to the last half of the 18th century and asks why there was no circulation of full-bodied coins even after notes had become convertible into silver at par in 1842. The argument put forward is that the choice of fiat paper money reflected the relative economic backwardness of the country. Although Gresham’s law also applied for Norway, the most important reason paper money caught on and maintained that position as the most important part of the money stock was the chronic shortage of means of payment. In such a situation, bad money was not that bad after all. Moreover, times of war and political havoc besides, paper money managed to stay fairly stable and fulfil an essential function as a store of wealth. With time, paper money became institutionalised in the Norwegian economy, overwhelmingly dominating the domestic circulation and functioning as the key monetary reference (unit of account). Thus, convertibility in 1842 linked the domestic currency with international money at fixed rates, but had hardly any bearing on the domestic function of money.

Keywords: Banknotes; bullion standard; convertibility; Gresham’s law; paper money (search for similar items in EconPapers)
JEL-codes: E42 E58 N23 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-12-04
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.norges-bank.no/en/news-events/news-pub ... pers/2009/WP-200925/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2009_25

Access Statistics for this paper

More papers in Working Paper from Norges Bank Contact information at EDIRC.
Bibliographic data for series maintained by ().