William Roberds (Federal Reserve Bank of Atlanta) – Inflation with a virtual printing press - Prussian monetary policy during the Seven Years War

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We analyze how Prussia was able to finance its participation in the Seven Years War (1756-1763) through inflation. Because Prussia at this time had no bond markets, central bank, or paper money, the inflation was implemented through the traditional channel of coin debasement. Much of the raw material used to produce Prussia’s debased coin was obtained in Amsterdam, Europe’s leading market for precious metals during this era. We combine archival evidence from the records of the Bank of Amsterdam (or “Bank”) with accounts in the literature to describe how the wartime debasement was operationalized. The Bank was a municipally owned institution with many of the functionalities of a central bank. Our analysis shows that, while Prussia had no central bank at this time, its inflation was supported by liquidity made available through the Bank. At the end of the war, Prussia returned to its peace-time coinage standard. The mechanism used to implement this return was fragile and came close to a disastrous collapse. Our analysis shows that Amsterdam and its Bank were again deeply involved in implementing and stabilizing Prussia’s postwar monetary policy.

Friday, September 27, 2019, 11:00 a.m.

Oesterreichische Nationalbank
Otto-Wagner-Platz 3
1090 Vienna

Please register until Tuesday, September 24, 2019