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FEDERAL RESERVE BANK of ATLANTA

How Amsterdam Got Fiat Money
Stephen Quinn and William Roberds
Working Paper 2010-17
December 2010

WORKING PAPER SERIES

FEDERAL RESERVE BANK o f ATLANTA

WORKING PAPER SERIES

How Amsterdam Got Fiat Money
Stephen Quinn and William Roberds
Working Paper 2010-17
December 2010
Abstract: We investigate a fiat money system introduced by the Bank of Amsterdam in 1683. Using data
from the Amsterdam Municipal Archives, we partially reconstruct changes in the bank’s balance sheet
from 1666 through 1702. Our calculations show that the Bank of Amsterdam, founded in 1609, was
engaged in two archetypal central bank activities—lending and open market operations—both before and
after its adoption of a fiat standard. After 1683, the bank was able to conduct more regular and aggressive
policy interventions, from a virtually nonexistent capital base. The bank’s successful experimentation with
a fiat standard foreshadows later developments in the history of central banking.
JEL classification: E42, E58, N13
Key words: Bank of Amsterdam, fiat money, commodity money, monetary policy, credit policy

The authors thank John McCusker for sharing agio data, Lodwijk Petram for sharing the Deutz folios, and Albert Scheffers for
help with the balance books. Also, for comments on earlier drafts the authors are grateful to Christiaan van Bochove, Pit
Dehing, Marc Flandreau, Oscar Gelderblom, Joost Jonker, and Charles Sawyer as well as participants in seminars at the
University of Alabama, the Bank of Canada, the Federal Reserve Banks of Chicago and New York, and Rutgers University. They
are also indebted to Michelle Sloan for many hours of skilled data encoding. Generous research and travel support was provided
by the Federal Reserve Bank of Atlanta and Texas Christian University. 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 William Roberds, Research Department, Federal Reserve Bank of Atlanta, 1000
Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8970, william.roberds@atl.frb.org, or Stephen Quinn, Department of
Economics, Box 298510, Texas Christian University, Forth Worth, TX 76129, 817-257-6234, s.quinn@tcu.edu.
Federal Reserve Bank of Atlanta working papers, including revised versions, are available on the Atlanta Fed’s Web site at
frbatlanta.org/pubs/WP/. Use the WebScriber Service at frbatlanta.org to receive e-mail notifications about new papers.

This version: December 7, 2010

How Amsterdam got Fiat Money1

Stephen Quinn, Texas Christian University
William Roberds, Federal Reserve Bank of Atlanta

Abstract: We investigate a fiat money system introduced by the Bank of Amsterdam in 1683.
Using data from the Amsterdam Municipal Archives, we partially reconstruct changes in the
bank’s balance sheet from 1666 through 1702. Our calculations show that the Bank of Amsterdam, founded in 1609, was engaged in two archetypal central bank activities—lending and open
market operations—both before and after its adoption of a fiat standard. After 1683, the bank
was able to conduct more regular and aggressive policy interventions, from a virtually nonexistent capital base. The bank’s successful experimentation with a fiat standard foreshadows later
developments in the history of central banking.

The authors would like to thank John McCusker for sharing agio data, Lodwijk Petram for sharing the Deutz folios, and Albert Scheffers for help with the balance books. Also, for comments on earlier drafts we are grateful to
Christiaan van Bochove, Pit Dehing, Marc Flandreau, Oscar Gelderblom, Joost Jonker, and Charles Sawyer, as well
as participants in seminars at the University of Alabama, the Bank of Canada, the Federal Reserve Banks of Chicago
and New York, and Rutgers University. We are also indebted to Michelle Sloan for many hours of skilled data encoding. Generous research and travel support was provided by the FRB Atlanta and TCU.

1. Introduction
Financial innovation consists of doing more (trading) with less (collateral). A key innovation, present in all modern economies, is the use of fiat money—a kind of virtual collateral whose
value derives only from the force of law and custom. Conventional wisdom says that fiat money
can enhance liquidity through “credit policy”—the directed relaxation of collateral constraints
through a central bank’s lending operations, and through “monetary policy”—the beneficial manipulation of economic aggregates through variation of the money stock.2
Fiat money, and its implications for policy, are usually seen as the twentieth-century developments. This paper analyzes an earlier and less well known experiment with fiat money, undertaken by the Bank of Amsterdam (Amsterdamsche Wisselbank, henceforth AWB or simply
“bank”). The Amsterdam experience with fiat money is noteworthy for its originality, its prominence in European financial history, and its compatibility with price stability over a long period
(roughly a century: 1680 through 1780). The AWB opened in 1609 as a municipal exchange
bank, an institution for facilitating settlement that was common in Early Modern Europe. Our
focus is on the period around 1683 when the bank limited its depositors’ ability to withdraw
coin, and so effectively became a fiat money provider. The fiat money regime remained in place
until the bank’s collapse in 1795.3
The AWB’s transition from exchange bank to fiat bank has been described by economic
historians (e.g., Mees 1838, van Dillen 1934, Neal 2000, Gillard 2004, van Nieuwkerk 2009), but
these contributions do not fully explain the motivation for the transition. If fiat money did indeed
lower and smooth the costs of collateral in Amsterdam markets, how were these changes mani-

2
3

In its pure form credit policy does not change the stock of money; see e.g., King and Goodfriend (1988).
The bank was not fully dissolved until 1819.

fested and who benefited? To lapse into modern terminology, how did an early central bank alter
its monetary and credit policies after limiting the right of withdrawal?
To shed some light, we examine historical data on the AWB. Using ledgers available from
the Amsterdam Municipal Archives, we have compiled partial balance sheets, at a daily frequency, for the AWB from 1666 through 1702, a period centered on the fiat money transition.
When combined with information from other sources, these data present a revealing picture of
the bank’s activities.
First, the data clearly show that the fiat money regime facilitated the AWB’s lending to a
preferred customer, the Dutch East India Company (Vereenigde Ostindische Compagnie or
VOC, a government-sponsored enterprise employing approximately 50,000 people during our
period of interest). The bank lent to the Company both before and after 1683; but afterward this
lending becomes more seasonal and regular in nature. Seasonality means that this lending often
does not show up in the annual AWB balance sheets assembled by van Dillen (1925) nor in the
annual balance sheets of the VOC assembled by de Korte (1984). Lending was cheaper and less
risky for the AWB after 1683 because liquid claims on the bank were limited and chances of a
run were ameliorated. Lending activities were extensive but, over the period considered, never
exposed the bank to substantial credit risk. We find that the 1683 changes also freed the City of
Amsterdam to frequently take the bank’s retained earnings from this profitable activity.
Secondly, our analysis indicates that both before and after 1683, the AWB regularly engaged in open market operations. Again, however, the character of this intervention evolves under the fiat regime, as the bank more often chose to “drain funds” by selling off its metal stock.
Indirect evidence suggests that an objective of these operations was to smooth short-term fluctuations in the stock of base money.

To summarize, the data we analyze show that by the time of 1683 transition, the AWB
managers had ample experience with both lending and open market operations. The move to fiat
money simply allowed for more vigorous pursuit of these same activities. The markets seem to
have applauded the change: following the 1683 reorganization, there was widespread agreement
that trading had been enhanced by this new, if puzzling, kind of money. Writing in 1767, James
Denham-Steuart offered the following explanation:
The bank of Amsterdam pays none in either gold or silver coin, or bullion; consequently it cannot be said, that the florin banco [bank money] is attached to the metals. What is it then which determines its value? I answer, That which it can bring;
and what it can bring when turned into gold or silver, shows the proportion of the
metals to every other commodity whatsoever at that time: such and such only is the
nature of an invariable scale.4
The rest of the paper is organized as follows. Section 2 sets the historical stage for the 1683
policy change. Section 3 describes and presents the data. Section 4 offers some interpretations of
the data. Section 5 discusses related literature, and Section 6 concludes.
2. Historical prologue
For Amsterdam, the original purpose of its exchange bank was to protect commercial creditors from the unreliable commodity money in general circulation. Modest debasement and resultant inflation was ubiquitous in the Early Modern Netherlands, so the AWB was to be an island
of debt settlement backed by high-quality coins (Quinn and Roberds 2009b). To support settlement, the bank needed to attract metal deposits, get debtors to internally transfer payments to
creditors, and deliver out metal of an assured quality. The Dutch chose to follow the model of
Venice’s Banco di Rialto and make the AWB an exchange bank that provided only payment and

(Steuart 1805, 75-76). For another favorable review of the Dutch monetary system see Adam Smith, Wealth of
Nations, Book IV, Chapter 3.

settlement services (Dehing and ‘t Hart 1997, 45-6).5 With no lending, the bank was to cover
operating expenses with fees.
Asymmetric rules promoted metal inflows and debt settlement but discouraged metal outflows. On the accommodating side, the AWB had no fees on deposits or internal transfers.6 Also,
one could present the AWB with precious metal in any form. If a coin had a price assigned by
statute, then the bank honored that price. Metal in other forms was valued by precious metal content. And once created, a balance could settle a debt through transfer to the creditor’s account.
Creditors gained finality and a trusted general collateral claim. Similar to modern large-value
payment systems (e.g., Fedwire), the AWB created finality through gross settlement, meaning
that the bank payments could credibly be viewed as final because the bank avoided extending
credit and never (explicitly) adopted netting of payments.7
Withdrawals, in contrast, were costly. The bank was obliged to supply high-quality Dutch
coins at official prices, but the bank was allowed to charge a withdrawal fee of up to 2 percent
for silver coins and 2.5 percent for gold coins, though under normal conditions, fees averaged 1.5
percent or less (Van Dillen 1964a, 348; see also Table 2 below). The fees compensated the bank
for minting costs and helped cover operating expenses. Most important to our story, however, is
that the fees discouraged withdrawals. Some uncertainty also existed, for the bank had discretion
regarding which of those Dutch coins it offered at withdrawal. If a customer desired a different

Unlike later central banks, the AWB did not issue circulating banknotes.
The bank was permitted to charge transfer fees but chose not to until 1683 (van Dillen 1934, 85).
7
Some qualifications are necessary. The bank cleared payments once every day (Mees 1838, 124-5) so there was in
principle scope for multilateral netting at a daily frequency, i.e., the practical seventeenth-century definition of “realtime” gross settlement was probably once per day. Also, an examination of AWB account positions every half year
indicates that despite rules to the contrary, some accounts were in an overdraft position during the summer months
of peak market activity, particularly before the 1683 transition (Willemsen 2009).
6

coin, then the bank could charge an additional premium based on its role as a moneychanger.
Moneychanger fees of some level were necessary to prevent coin-to-coin arbitrage.8
This paper focuses on the consequences of withdrawal structure, yet we stress that the effects of the early AWB’s high withdrawal fees varied by customer. Unlike a modern central
bank, anyone could open an account, so customers ranged from foreign merchants to financial
intermediaries. Among merchants who routinely operated within the bank’s internal payment
system, fees were a negligible concern, for they did not expect to withdraw balances. Of far
greater moment to them was that the city of Amsterdam required all large bills of exchange to be
settled at the AWB. The requirement created demand for deposits, for bills of exchange were the
primary means of commercial credit. The bank’s total balances reached 925,562 guilders after
one year (van Dillen 1934, 117), and grew to 8.3 million guilders by 1683, approximately 5 percent of the coin stock of the Dutch Republic (De Vries and van der Woude 1997, 90).9
In contrast, customers who did expect to withdraw specie learned to skip the primary account-to-coin process offered by the bank. One could avoid bank fees by paying for coins outside
the bank with free transfer inside the bank. Fee avoidance also meant that potential deposit customers did not bring metal to the bank. By 1650, the outside market in bank balances had deepened as private bankers, called cashiers, emerged as dealers who specialized in holding AWB
balances and various coins (Van Dillen 1964a, 366-7).
The secondary market lived on margins within the bid-ask spread of the AWB’s primary
coin-account facility, and the expected costs of the primary market were particularly high for
short-term deposits. For example, someone who deposited metal and withdrew it one month later
at a 1 percent fee had, in effect, borrowed funds at a simple annualized rate of 12 percent. The
8

Arbitrage is discussed in more detail in Section 4.
The guilder, also known as the florin, was the unit of account in the Dutch Republic. At the time of the AWB’s
founding, the guilder did not correspond to an actual coin in circulation.

AWB was thus an expensive place to “park” specie. Relative costs fell with time, and long-term
participants in the Amsterdam payment system, like cashier-bankers, could recoup these “borrowing” costs through their secondary market operations. As a result, the short-term metal market stayed outside the bank, and little metal routinely flowed in or out of the bank. Instead, deposits waited for periods of cheap metal and withdrawals for expensive metal.
2.1 Lending
Lending was the first major deviation from the bank’s original plan. The bank soon began
lending to the city, the province of Holland, the Republic, government sponsored entities like the
VOC, and select individuals such as mint masters and officers of the Admiralty (Van Dillen
1934, 94-100).10 After a turbulent half century, however, the bank limited new lending to Amsterdam and the VOC. Table 1 gives the bank’s balance sheet at the end of January 1669. The
bank’s metal-to-deposit ratio is 74 percent. While not a reckless position, the bank needed to be
mindful of the threat of a run.
Table 1. Bank of Amsterdam Balance Sheet as of January 31, 1669
(Millions of Bank Guilders)

Assets

Liabilities

4.5 Metal

6.1 Deposits

2.1 Loan to Amsterdam
0.2 Loan to Holland
1.1 Loan to VOC

1.8 Capital

7.9 Total

Source: Amsterdam Municipal Archives, 5077-1314.
10

The bank’s lending activities were widely rumored, but the bank did not publicly acknowledge these until much
later. See, e.g., Steuart (1805, 403).

Indeed, the French invasion of the Dutch Republic triggered a run in June 1672, during
which (our calculations find) the bank lost 34 percent of its balances in two weeks.11 Both the
Province of Holland and the VOC suspended debt payments, 12 but the bank successfully passed
this test, partly because withdrawal fees had kept the large yet volatile short-term specie flows
out of the bank. The absence of “hot money” directly reduced the scale of the run and spared the
bank the adverse signals produced by the sudden flight of short-term capital.
Evidence also suggests that the bank adjusted fees to affect withdrawal rates, for the bank
raised fees in 1672 and kept them high for years afterward. Average fees can be estimated from
the ratio of the bank’s non-interest revenues as a percentage of total withdrawals from 1666 to
1681; these ratios are reported in Table 2. The calculation is possible because the bank reported
its revenue for these years.13 From total revenue, we subtract interest from loans to get a numerator that is an imperfect proxy for fee revenue because we do not know the extent of nonwithdrawal revenue from sources like overdraft fees, bullion trading, etc., so we cannot explain
what loss adjustment created an outlier like the 1676 observation. The denominator we have constructed from the AWB’s ledgers, and we are missing complete withdrawal information for three
of the years. Peering through noise and missing years, fees rose in 1671 as war fears and withdrawals mounted, fees jumped in 1672 with the panic, and fees remained high until at least 1675.

On June 14, 1672, the AWB’s total balances were 7.6 million guilders. Balances had fallen to 5.0 million by June
30 with a metal stock at an estimated 4.5 million.
12
For sovereign debt, see Gelderblom and Jonker (2010). For the VOC, see de Korte (1984, 66).
13
After 1683, the AWB reported only profit: revenue less expenses.

Table 2. AWB Non-Interest Revenues as a Percent of Withdrawals
1666
0.76%

1667
0.79%

1668
0.84%

1669
0.93%

1670
0.78%

1671
1.24%

1672
2.19%

1673
NA

1674
1.61%

1675
1.53%

1676
0.13%

1677
NA

1678
1.00%

1679
NA

1680
1.00%

1681
1.78%

Source: See Appendix A.

2.2 The Bank Guilder
The other major deviation from the bank’s original scheme requires some background, for
it defies conventional expectations, then and now (Quinn and Roberds 2009a). In 1638, the
Dutch Republic raised the official price of a coin called the patagon, a coin minted in the
neighboring Spanish Netherlands. The invading patagon intentionally contained 4 percent less
silver than the domestic rijksdaalder issued by the AWB. The new price put the bank in an unsustainable position, for the 1638 rule said that the bank had to accept patagons at 2.5 guilders
each, but the old rules made the bank to offer out rijksdaalders at the same price. After a period
of arbitrage losses, the bank switched to giving out patagons at withdrawal — a 4 percent “haircut” for depositors. To then make depositors whole in terms of silver, but still avoid rekindling
arbitrage, the AWB decided in 1645 to reduce the price of patagons at the bank by 4 percent,
from 2.5 to 2.4 guilders each. So, in the end, a customer received 4 percent more coins per guilder, but each coin held 4 percent less silver.
This ad hoc solution had the unintended effect of creating a separate unit of account for
bank funds, the bank guilder, distinct from the current (non-bank) guilder (Quinn and Roberds
2007). How so? The Patagon was worth 2.4 bank guilders inside and 2.5 current guilders out-

side.14 In turn, a secondary market developed between the two units of account. Figure 1 offers
before and after schematics. Before 1638, each type of coin had a direct secondary market relationship with the bank that swapped media of exchange: coins for accounts. After 1645, the secondary market focused on exchanging units of account: bank guilders for current guilders. A
separate price then traded current guilder accounts at cashier-bankers into coins.
Figure 1. Secondary Market Structure

Pre-1638

Post-1645

Account

Bank
Guilder

Media of Exchange

Unit of
Account
“AGIO”

Current
Guilder

Coin

Media of
Exchange

Coin

The exchange market between bank guilders and current guilders deepened to become the
principal measure of the value of the bank guilder. The exchange rate was called the agio, and
the market measured the agio as the premium commanded by bank guilders. If the agio was 3
percent, then 100 bank guilders bought 103 current guilders. To the extent that the metal content
of current money changed only slowly after 1659, the agio can be thought of as a price of bank
money in terms of a reference collateral good, i.e. silver. Because of the relatively high withdrawal fees, however, the primary market remained little used.

When the Dutch Republic replaced the patagon with domestic coins in its 1659 minting ordinance, the state retained the dual price structure and assigned two silver coins, the dukaat and the rijder, a distinct bank guilder value,
current guilder value, and implicit exchange rate. See Table 5.

2.3 The 1683 restructuring
The changes of the 1680s—the focus of this paper—hinge around the AWB introducing a
new primary withdrawal structure that greatly reduced the asymmetry between deposits and
withdrawals.15 In 1683, the bank started to give customers a receipt for the specific coins they
deposited.16 At withdrawal, the receipt obliged the AWB to return the same coins at the deposit
price. Also, the receipt’s redemption fee was only ½ percent for gold and ¼ percent for silver.
Customers found the receipt’s specific claim and low fee far more attractive than the traditional
general claim at a high fee. Customers rushed to use the new facility.
The bank also made receipts negotiable, and resale mattered because the pre-existing stock
bank guilders did not get receipts, so about 8 million bank guilders had only the right to expensive traditional withdrawal.17 For new deposits, the 1683 reform unbundled the traditional deposit contract (in which a depositor receives a transferable claim on the bank, plus an option to
withdraw) into two separate contracts: the bank guilder account and the receipt. The receipt’s
option to withdraw metal lasted six months, but one could renew a receipt for another six months
by paying the withdrawal fee. Receipts were especially popular with foreign merchants as a lowcost way of temporarily parking precious metals in Amsterdam, to take advantage of profitable
trading opportunities if these presented themselves. Coin could be withdrawn later as necessary,
at low cost.
Customers learned to trade for the new withdrawal claim instead of exercise the old claim
attached to the account, so demand for traditional withdrawal withered. This circumstance al-

The new structure had been suggested by an Amsterdam businessman, Johannes Phoonsen, in a 1676 essay (van
Dillen 1921). At this time the bank also began charging both sides of all transfers 0.00025 percent payable at the end
of the fiscal year (van Dillen 1934, 85).
16
The receipt allowed its holder to claim the coin anytime within a six-month period, i.e., the receipt resembled an
American call option on a specific type of coin, or put option on bank funds.
17
Legally, new deposits became repurchase agreements between the depositor and AWB (van Dillen 1964b, 395).

lowed the AWB to quietly limit the right to traditional withdrawal sometime in the 1680s.18 This
is when the bank guilder transformed into quasi-fiat money in that one had a right to withdraw
metal only if one had a receipt. The stock of bank guilders split into commodity-backed receipts
and what Mees (1838) terms an “irredeemable coin of account”—fiat money.
Amsterdam’s acquiescence to fiat money seems to follow from customers no longer expecting to use traditional withdrawal except during a run on the AWB. We stress that attentive
customers could perceive themselves gaining more than they lost. After the introduction of receipts, the option to withdraw the old way was “in the money” only during a run, yet exercising
traditional withdrawal created large runs. Eliminating the individually superior yet collectively
dangerous strategy (traditional withdrawal) left a feasible limit on the extent of a run (the stock
of receipts), so giving up the option made individuals better off, as long as others also relinquished their option. In the tight-knit world of Dutch political economy, such collective understandings were not uncommon. For example, provincial governments repeatedly but informally
suspended sovereign debt payments during crises with little creditor outcry (Gelderblom and
Jonker 2010).
Of course, reducing the threat of runs created new incentives for the AWB that customers
might not have foreseen; these are described below. Finally, moving to receipts and away from
traditional withdrawal also meant abandoning the AWB’s original symbiosis with Dutch coins.
That separation, however, had already begun in 1680 when the Dutch Republic introduced the
gulden: a silver coin worth one current guilder. The gulden set a new standard for the Republic’s
basic circulating coin, but that standard had no official price at the AWB. The absence of statu-

Exactly when redeemability was abolished is unknown. To quote van Dillen (1934, 101): “to that great change no
ordinance nor any precise date can be assigned.” Indirect evidence, described in Section 4, indicates that redeemability had been de facto abolished by 1685.

tory bank-to-current guilder exchange rate freed the bank’s hands to influence the market agio
through its policies.
3. Data
Researchers interested in the activities of modern central banks have access to copious
amounts of data. The Federal Reserve System, for example, publishes its balance sheet on a
weekly basis (the H.4.1 release) and publishes daily data on the market price of its liabilities (the
effective fed funds rate). Some studies have even examined records of individual transactions
over central banks’ payment systems (for Fedwire, see e.g., Bartolini et al. 2008; Furfine 1999,
2001, 2003, 2006; McAndrews and Potter 2002; McAndrews and Rajan 2000) to analyze money
market activity. Almost incredibly, much of this same information is preserved for the Bank of
Amsterdam. This section introduces the data used in our investigations.19
Turning first to balance sheet data, complete balance sheets for the AWB (totaling both assets and liabilities) are only available at a yearly frequency.20 However, the ledgers of the bank,
available at the Amsterdam Municipal Archives, record every transaction in AWB funds over a
given period, so we use the ledgers to reconstruct daily time series of movements in bank liabilities, i.e., changes in aggregate stock of AWB money. Money creation (e.g., deposits) and destruction (withdrawals) is recorded on ledgers of a bank master account.21 Similarly detailed records of the bank’s metallic assets and some determinants of capital (fee revenues, expenses, and
open market profits) have not survived for our period of interest, but some assumptions allow us
to construct monthly capital-to-asset ratios in line with known annual figures.

The data are described in detail in Appendix A.
These were calculated at the end of every January when the bank was closed to reconcile accounts. See Van Dillen (1925).
21
The Specie Kamer or “coin room.”
20

Loan assets can be reconstructed at the daily level. Lending to the East India Company in
particular is easily detected using a “Furfine algorithm”: VOC loans appear as large debit entries
to the bank’s master account (credits to the VOC), for large sums in round numbers, and (principal) repayments as similar credit entries.22 Potential open market operations are more problematic. A given debit entry to the bank’s master account, for example, may represent an open market purchase, or simply a deposit. Still, we can identify some likely episodes of open market interventions with the help of a second Furfine algorithm, described below.
With the loss of most early ledgers, a reasonably continuous series of extant ledgers only
begins in 1666, so our data set starts then. We end in 1702 to capture 35 years of activity surrounding 1683. We focus only on transactions that change the stock of bank guilders. Even so,
we have encoded 20,000 individual master account debit transactions (those that created bank
guilders through the deposit of metal, purchase of metal, or new lending). Credit transactions
(withdrawals, sales, or loan repayments) produced 17,000 individual transactions. To gain visual
clarity and compatibility with the agio data, data have been aggregated into monthly observations: levels being the start of a month and flows being month finish less month start. 420
monthly observations are available over the sample period of 444 months. 23
Available price data are less complete, but nonetheless extensive. The time series we use is
a set of monthly (presumably, average) observations on the market price of bank money (i.e., the
agio), spliced together from two sources. The first is an augmented and unpublished version of
the agio series in McCusker (1978), generously provided to us by John McCusker. The second is
from the records of Joseph Deutz, a prominent Amsterdam merchant, available at the Amsterdam
22

A nearly identical method, pioneered by Furfine (1999), has been used by researchers to filter interbank loan
transactions from modern large-value payment system data (e.g., fed funds transactions from Fedwire data).
23
Six half-years are missing out of the 70 half-years covered here. Missing periods are February-July 1673, February-July 1677, September 1682-January 1683, August 1684-January 1685, September 1697-January 1698, and September 1700-Janurary 1701.

Municipal Archives.24 The McCusker data cover our whole period, while the Deutz data run
from 1662 to 1688. Combining the two data sources yields 290 monthly observations. For some
of our econometric exercises (e.g., VARs), the agio series was interpolated to a full sample using
a related series, the London price of Amsterdam bills reported in McCusker (1978).25
Agios are quoted in sixteenths of a guilder, attesting to the liquidity of the market for bank
funds. A sixteenth of a guilder also represented the typical profit margin for a cashier on a bank
money trade (Steuart 1805, 405).
3.1. Balances and the Agio
The basic data on quantity (AWB balances) and price (agio) are presented in figures 2 and
3. The gaps in the balance series follow from time’s decimation of records. Also, to focus on the
routine, figure 3 truncates the very low agio values observed during the 1672 French invasion
and very high agio observations in 1693.26 Interpolated values of the agio are shown as dotted
lines in figure 3. Vertical lines in the charts mark the initiation of the receipt system.

Amsterdam Municipal Archives inventory numbers 234 / 290 through 295.
See Appendix A for the details of the interpolation.
26
The early 1693 spike in the agio resulted from a widely anticipated, legally mandated devaluation of two coins,
the schelling and the 28-stuiver, that had become severely debased (Mees 1838, 113-114). The coins circulated as
current money but were not eligible for deposit at the AWB. The devaluations were for 7 and 8 percent respectively,
causing the agio to temporarily run as high as 13 percent (the usual 5 percent premium of bank money above current
money plus the amount of the anticipated devaluation).
25

Figure 2: Monthly AWB balances 1666:2-1703:2
17.5

Millions of Bank Guilders

15.0
12.5
10.0
7.5
5.0
2.5
0.0
1666 1668 1670 1672 1674 1676 1678 1680 1682 1684 1686 1688 1690 1692 1694 1696 1698 1700 1702

Source: See Appendix A.

Figure 3. Agio, by month, 1666:2-1703:2
8

Percent Premium

2
1666 1668 1670 1672 1674 1676 1678 1680 1682 1684 1686 1688 1690 1692 1694 1696 1698 1700 1702

Source: See Appendix A.

3.2 The AWB’s uses of funds
The first step in analyzing the asset side of the bank’s balance sheet was to strip out VOC
loan balances using the procedure mentioned earlier. These are shown in Figure 4.

Figure 4. VOC loan balances (principal) by month, 1666:2-1703:2
2.5

Millions of Bank Guilders

2.0

1.5

1.0

0.5

0.0
1666 1668 1670 1672 1674 1676 1678 1680 1682 1684 1686 1688 1690 1692 1694 1696 1698 1700 1702

Source: See Appendix A.

Lending to the VOC was an important activity of the bank, both before and after 1683 (Uittenbogaard, 2009). The Amsterdam city council authorized a credit line of 1.7 million in 1682
(Mees 1838, 196), but figure 4 shows that this limit had already been breached in practice. The
peak level of VOC indebtedness does not increase after 1683, but the data clearly show that
multi-year bank credit to the VOC fell away after 1683 while short-term trough-to-peaks grew.
The data challenges are more severe for non-VOC uses of funds. Bank records say nothing
about what collateral changed hands when bank guilders were created or destroyed, but the bank
did use different accounting channels for different types of transactions. We have identified one
channel for coin deposits and another channel for bullion purchases. Essentially, coin deposits
are routed through the accounts of the bank’s clerical staff, while purchases (i.e., sales of balances) appear directly as debit entries to the bank’s master account (see Appendix A for details).
Metal sales by the bank (purchases of balances) do not have a distinct accounting channel,
so these sales are (somewhat more tentatively) proxied using another Furfine algorithm: round
guilder transactions are assigned as “coin withdrawals” and transactions with fractional amounts
to “bullion sales.” We describe coins as being deposited and withdrawn because the bank was
obliged to accept and return official coins at ordinance prices. Recall that the withdrawal contract
17

was defined in terms of official coin prices and that altering such prices undermined the collateral structure of all balances. In contrast, the bank had latitude regarding bullion (including nonofficial coins, metal wire, etc.), and the bank routinely violated what restrictions had been placed
on the buying and selling of bullion (van Dillen 1934, 92-3).
Based on this sorting of transactions, much of the increase in balances after 1683 came
through more coin deposits. And, as would follow from lower withdrawal fees, there were also
more coin withdrawals. Figure 5 presents the amount of coin deposits and withdraws by month
from February 1666 to January 1703. Inflow and outflow deepened considerably after the regime
change. Note that post-1683 inflows roughly mirror outflows, providing some confirmation for
the algorithm used to identify coin withdrawals.
Figure 5. Monthly Coin Deposits and Withdrawals, 1666:2 to 1703:2
1.00

Millions of Bank Guilders

0.75
0.50
0.25
0.00
-0.25
-0.50
-0.75
-1.00
1666 1668 1670 1672 1674 1676 1678 1680 1682 1684 1686 1688 1690 1692 1694 1696 1698 1700 1702
Coin deposits

Coin withdrawals

Source: See Appendix A. Note that June 1672 Coin Withdrawals is truncated: the observation’s value is -2,478,372
bank guilders.

If the fee reduction facilitated withdrawals (and therefore more deposits), it should also
have promoted smaller yet more frequent withdrawals. To check this, figure 6 plots annual withdrawal transactions against the average withdrawal size. By drawing a line at 5,000 guilders, one
clearly sees that withdrawal transactions jump after 1683: the outlier being the crisis year of
1672 behaving similarly to a typical year under the receipt system. Withdrawal size shows a
18

similar pattern with 3 out of 14 early
e
years avveraging bellow 5,000 guuilders and 3 out of 15 laater
2
years aveeraging abov
ve the same.27
The seriess have a corrrelation of -00.64.

Figurre 6: Averagge Size versu
us Number of Withdraawals, 1666 to 1702

Thee transaction
ns we identiffy as bullion operations show
s
a different pattern.. Figure 7 prresents ourr calculation of bullion purchases
p
andd sales by month
m
over ouur sample peeriod. Total purchases beefore 1683 (14.6 millionn) roughly eqqual purchases after (15.4 million), while
w
total saales
doubled from
f
8.6 milllion (1666-1682) to 16.7 million (1683-1703). A dramatic aspect
a
of thee
bullion seeries is the in
nfrequent sppikes that wee suspect aree large open market operrations. Therre is
noticeablle asymmetrry between sales and purrchases: there are 9 montths where thhe AWB pur-chased more
m
than 700
0,000 guildeers worth of metal, but no
n months duuring which the bank sellls so
much meetal.

Note thaat the vertical scale is logged to enhance visual clarity.

Figure 7. Monthly Bullion Purchases and Sales, 1666:2 to 1703:2

1.00

Millions of Bank Guilders

0.75
0.50
0.25
0.00
-0.25
-0.50
-0.75
-1.00
1666 1668 1670 1672 1674 1676 1678 1680 1682 1684 1686 1688 1690 1692 1694 1696 1698 1700 1702
Purchases

Sales

Source: Appendix A.

To finish our partial reconstruction of asset side of the AWB’s balance sheet, the series
shown in Figures 5 and 7 must be integrated over time to obtain series on cumulated deposits and
cumulated purchases. Since there are no initial values for these two component series, some
normalizing assumption is required. We conservatively set the bank’s February 1666 purchases
to zero, and set the initial value for cumulated deposits to be the entire stock of bank balances,
excluding VOC loans. The two series are graphed together in Figure 8. The pre-1683 era shows
that the stagnation of bank balances involved a long decline in deposits and an offsetting rise in
the purchases. 28 After 1683, deposits were the driving force behind the expansion of bank balances.29 The receipt system was a way to arrest the long term decline in deposits.30

The decline of deposits likely began in the 1650s when the long-term growth in AWB balances ended. Quinn and
Roberds (2009a) argues that the stabilization of the monetary system in the 1650s obviated the AWB’s original role
of protecting creditors from poor coinage, so demand for deposits slackened.
29
Post-1683, cumulated purchases would approximate “outright purchases” of assets on a modern central bank’s
balance sheet, while cumulated deposits would (again quite roughly) correspond to “repurchase agreements.”
30
Demand for deposits also revived from instability in coin quality lasting from 1680 to 1693. See section 4.2.

Figure 8. Cumulated Net Deposits and Bullion Purchases, 1666:2 to 1703:2
10

Millions of Bank Guilders

-2
1666 1668 1670 1672 1674 1676 1678 1680 1682 1684 1686 1688 1690 1692 1694 1696 1698 1700 1702
Deposits

Purchases

Source: Appendix A.

3.3 Summary statistics
Table 3 reports statistics on the data series before and after the 1683 regime change.
Table 3. Statistics on the Agio and AWB Balances
Sample

μ ( x)

σ ( x)

μ ( Δx )

σ ( Δx )

1666:2-1683:7

3.89

0.458

0.007

0.256

1683:8-1703:2

4.83

0.530

0.067

0.407

Total balances

1666:2-1683:7

6.79

1.29

-0.006

0.413

(million guilder)

1683:8-1703:2

12.51

2.41

0.004

0.586

VOC Loan Princi-

1666:2-1683:7

.685

.557

0.000

.231

pal

1683:8-1703:2

.592

.623

0.001

.474

1666:2-1683:7

2.90

2.72

-0.039

0.335

1683:8-1703:2

5.27

2.15

0.011

0.363

1666:2-1683:7

3.20

2.31

0.031

0.196

1683:8-1703:2

6.43

0.656

-0.006

0.188

Series
Agio (percent)

Deposits

Purchases

K ( x)

K ( Δx )

5.69**

1.04

8.92**

1.83**

1.56*

2.62**

4.48**

1.92**

8.09**

3.31**

Source: see Appendix A. Statistics for the agio omit two episodes of outliers: June-October 1672 and JanuaryFebruary 1693. K denotes the nonparametric Kolmogorov-Smirnov test statistic for the null hypothesis of equality of
distributions (across subperiods): approximate, two-sided 5 percent and 1 percent critical values for K are 1.36 and
1.63, respectively.

The table indicates that after 1683 the agio fluctuated around its approximate statutory
level of 5 percent; it also becomes more variable. The distribution of first differences in the agio
does not change significantly across samples, i.e., there is no change in “smoothness” of the agio
after 1683. Balances increase due to accumulated metal purchases and an influx of deposits. Outstanding loans to the VOC average about the same before and after 1683, but these become less
smooth after the reform. Purchases are notably less variable after the 1683 reform.
The empirical literature on the founding of the Federal Reserve (see Section 5) emphasizes
changes in seasonal patterns for certain macro series around the time the Fed began operations in
1914. With these results in mind, we conducted three exercises to see whether the AWB’s 1683
reform resulted in similar changes. The first exercise was to simply calculate monthly means for
the agio and the three monetary component series; these are shown in Figure 9.
Figure 9: Monthly means (percent deviation from annual means)
AGIO
5.0
0.0
1666:2-1683:7

-5.0

1683:8-1703:2

-10.0
J

VOC debt
60
20

1666:2-1683:7

-20

1683:8-1703:2

-60
J

DEPOSITS
15
5
1666:2-1683:7

-5

1683:8-1703:2

-15
J

PURCHASES
2
1666:2-1683:7

-1

1683:8-1703:2

-4
J

There is little visual evidence of seasonality in the series for the agio and purchases, either before
or after 1683. Monthly means for deposits display less seasonality after the regime change, while
VOC debt becomes highly seasonal. These patterns were confirmed in a second, more formal
exercise, which consisted of performing standard F-tests for the significance of seasonal dum22

mies in each equation of a VAR model (described in more detail in section 4) for the four series.
Deterministic aseasonality is rejected at conventional significance levels for VOC purchases and
deposits, but accepted for the agio and purchase series. This pattern holds before and after 1683
The third exercise was to estimate spectra for the four data series in order to check for indeterministic seasonality; these are shown in Figure 10.
Figure 10: Estimated spectral densities (log scales)
Agio, 1666:2-1683:7

Agio, 1683:8-1703:2

100.000

10.000

1.000

0.100

0.010

0.001

0.001
0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.2

0.4

Fractions of pi

0.6

0.8

1.0

0.6

0.8

1.0

0.6

0.8

1.0

0.8

1.0

Fractions of pi

VOC debt, 1666:2-1683:7

VOC debt, 1683:8-1703:2

1e+013

1e+012

1e+012
1e+011

1e+011
1e+010

1e+010

1e+009
1e+008

1e+009
0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.2

0.4

Fractions of pi

DEPOSITS, 1666:2-1683:7

DEPOSITS, 1683:8-1703:2

1e+014

1e+013

1e+012

1e+011

1e+010

1e+009

1e+009
0.0

0.2

0.4

0.6

0.8

1.0

0.0

0.2

0.4

Fractions of pi

PURCHASES, 1666:2-1683:7

PURCHASES, 1683:8-1703:2

1e+014

1e+013

1e+012

1e+011

1e+010

1e+009

1e+009
0.0

0.2

0.4

0.6

0.8

1.0

Fractions of pi

0.0

0.2

0.4

0.6

Fractions of pi

The most striking feature of figure 10 is that the spectrum for VOC balances displays welldefined maxima centered around seasonal frequencies of π / 6 , π / 3 ,and 2π / 3 (12-month and
harmonic cycles), post-1683. Seasonality for the other series is relatively modest and there are no
great differences across subsamples.
Summarizing the results of this section, initial exploration of the data suggests that the
post-1683 regime was characterized by higher flows and levels of deposits, somewhat less variable purchases, a higher average agio, and more seasonal and regular borrowing on the part of
23

the VOC.31 The next section investigates to what extent these observed changes can be attributed
to changes in policy.
4. The impact of policy changes
To market participants at the time, receipts were the only obvious discontinuity in the function of the AWB after 1683. As before, the bank continued to serve as a trusted settlement service provider and as a (surreptitious) financial intermediary to the VOC. Convertibility of deposits was limited, but money could easily be traded for coin on the open market, much as before.
Where then were the gains associated with the adoption of a fiat standard?
Our answer, in essence, is that placing restrictions on withdrawals allowed Amsterdam to
partly escape the opportunity costs of a system of exchange based on commodity money (e.g.,
Sargent and Wallace 1983), as compared to a system with either greater availability of credit, or
fiat money. To be certain, some amount of commodity money was essential for the functioning
of a seventeenth-century open economy. A great entrepôt of its day, Amsterdam was where
Europe purchased goods from Asia and other points east with silver unearthed in the Americas
(de Vries and van der Woude 1997). Over time, Amsterdam also became the center of the European bullion trade.
However, the data shown in figure 5 indicate that before 1683, the bulk of the metal backing for AWB deposits rarely entered or left at the monthly frequency, so the high cost of withdrawing funds from the bank meant that the principal purpose of this metal was to confer value
to the bank guilder. Over the longer term (figure 8), withdrawals outpaced deposits, but the
AWB chose to offset this trend with purchases, so overall balances remained stable (figure 3).

Available data indicate that the regime change seems to have had virtually no impact on trend inflation. Annual
price indices for the Netherlands (van Zanden, 2004) show an average yearly deflation of 0.38% from 1666 to 1684
and 0.30% from 1684 to 1702.

The prospect of seven million guilders’ worth of metal simply sitting in the bank’s vault must
have tempted even the most ardent hard-money advocates. The 1683 reform nudged the AWB’s
functionality somewhat closer to that of a modern central bank.
4.1 Credit policy
The AWB’s early lending activities represented a partial shift to an asset-backed currency.
As long as all deposits were convertible, however, the bank learned to be reluctant about extending credit much in excess of its capital position. Either the bank exposed itself to the risk of a run
by lowering its metal-to-deposit ratio, or it financed lending from its own capital, or a combination of the two. Alternatively, the bank could slacken its liquidity constraints by imposing higher
withdrawal fees as it did in 1672, but this discouraged deposits and imposed costs on market
participants. We will now elucidate how the bank lent more frequently with less capital cushion
after 1683.32 To do so requires a discussion of the bank’s relationship with the City of Amsterdam.
The bank’s activities as financial intermediary were closely constrained by its relationship
with the city. After the VOC, the city was the bank’s other major borrower, if borrower is the
correct term.33 Figure 11 shows the evolution of the city’s debt over the sample period. In the
early 1650s, the city had borrowed 2 million guilders in metal from its bank, and soon afterwards
the city stopped paying interest on the loan and never again paid interest on its debt. Figure 11
shows this debt still on the books in 1666 through 1683. In 1683, the city began taking out more
metal, in grey, and occasionally paying some of it back, but these metallic loans did not create

32
33

See Appendix B for a formal model of the changeover in the bank’s credit operations.
The Province of Holland’s debt also appears on the AWB’s books but never changes during our sample period.

balances.. Loans to th
he city that did
d create ballances are inn black, and those loans do
d not beginn to
substantiially add to AWB
A
balancces until Deccember1698..34
Figuree 11: Amsteerdam Loan
ns Outstanding by Mon
nth, 1666-17702

Source: AW
WB Balance Books,
B
see Appendix A for deetails.

Am
msterdam’s im
mpact on thee AWB is eaasily missed because the city bookedd its removall of
metal or balances as loans. The city
c did not pay
p interest and
a eventuallly wrote offf the loans byy
c
This accounting hid periods of negative capital. Figuure 12 showss our
reducing the bank’s capital.
calculatioon of the ban
nk’s monthlyy adjusted caapital-to-asset ratio overr our period. The ratio treeats
municipaal “loans” ass capital deduuctions.
Thee adjustmentt shows that the 2 millionn guilders thhe bank gavee to city in thhe early 16500s
(to build a new city hall)
h
put the AWB into a negative poosition, and it
i shows thatt this era endded
a
the Crissis of 1672. Negative
N
cappital,
when thee AWB begaan to grow caapital faster than assets after
however,, returned affter 1683 throough the proocess depicteed in figure 11 above. Thhereafter, thee
city tookk capital during periods of
o need and then
t
let depoosits (figure 8) raise the capital
c
ratio. By
34

A lone 20,000
2
guilder balance
b
was crreated in June 1682.

1795, the city had taken 6.5 million guilders from the bank (our calculation). The only indication
of this in the traditional series is the bank’s occasional write-off of loans until book capital
neared zero: 2.3 million guilders in 1685 and 170,000 guilers in 1691 (Willemsen 2009, 85).
Limiting the right of withdrawal allowed the city take metal and the bank admit (at least to itself)
to having no capital.
Figure 12. Adjusted Asset Ratios, by Month, 1666 to 1703
40.0%

30.0%

20.0%

10.0%

0.0%

-10.0%

Capital/Asset

Feb-02

Feb-99

Feb-96

Feb-93

Feb-90

Feb-87

Feb-84

Feb-81

Feb-78

Feb-75

Feb-72

Feb-69

Feb-66

-20.0%

Loan/Asset

Source: Authors’ calculations using van Dillen (1925, 701-97, 971-84) and our data set.

Figure 12 also plots a loan-to-asset ratio which, after removing municipal takings and their
subsequent write-offs, leaves mostly variations in VOC borrowing. In the first half of our period,
the combination of long-term lending to the VOC and a weak deposit base meant that the AWB’s
27

monthly loan/asset ratio averaged 16 percent (our calculation). With the regime change, peak
lending did not change (figure 4), but the loan/asset ratio declined to a 7 percent average because
loans did not linger and because the deposit base grew (figure 8).
The increase in seasonal lending meant that the VOC increased its use of the AWB as a
regular supplier of operating credit. The bank was a major lender to the VOC because it enjoyed
certain advantages: its perpetual nature,35 its political position,36 and its privileged position in bill
settlement. But the VOC also had direct access to the Dutch bond market and averaged a total
year-end debt of 10 million current guilders over our sample period.37 The strong seasonality,
especially after 1683, suggests that the VOC valued the AWB as an overdraft facility to acquire
metal to ship to Asia. 38
Some confirmation of this can be detected from surviving records of the VOC. De Korte
(1984) collected annual VOC balance sheets that give levels at the start of a fiscal year (usually
May 31) for assets such as cash, credits, and the inventory of unsold goods; and for liabilities
(primarily corporate debt). Better still, three flow variables are also known for the fiscal year:
expenditures paid, dividends paid and revenues collected.39 An OLS estimation reported in Table
4 calculates how these variables correlate with our dependent variable of interest, the amount the

The 1609 charter of the bank contained no “sunset date.” This contrasts with say, the First Bank of the United
States, which received a 20-year charter.
36
During the period we analyze, the AWB was governed by a board of commissioners, comprised of three or four
prominent individuals such as former mayors (‘t Hart, 2009).
37
See Appendix A, Table A10.
38
The regime change of 1683, however, does not explain the end of multi-year lending by the bank to the VOC.
That change coincides with structural changes in the VOC’s corporate debt following from the crisis of 1672 (de
Korte 1984, 66). At the start of our sample, 1666, the VOC’s long-term debt was in the form of bonds callable at par
by either debtor or creditors. The VOC had a program of retiring long-term debt in 1670 until the crisis in 1672, and
the lack of borrowing in Figure 4 for those years is evident. During the 1672 crisis, the VOC suspended the call
option, and in the years that followed restructured its debt to avoid this problem. First, the VOC began offering
short-term anticipations that gave a senior claim on auction proceeds from the next fleet to arrive. Then the company
issued long-term debt without creditor call options. The bubble of multi-year borrowing (figure 4) from 1676 to
1682 appears to have been part of the VOC’s debt restructuring.
39
All are measured in current guilders, and all are for operation in the Netherlands. Ships at sea and operations in
Asia are excluded.

VOC borrowed that year from the AWB.40 Expenditures during a year strongly and positively
correlate with borrowing, and suggest a derived demand for AWB loans of 25 percent of VOC
expenditures. In contrast, information about that year’s sales revenue lacks explanatory power.
These results agree with the idea that the VOC was borrowing to outfit ships before the year’s
fleet returned from Asia, and about half of equipment costs were coins (Korte 1998, 16).
Table 4. VOC Correlates to AWB Lending, 1666 to 1702
Dependent Variable: AWB LENDING in Bank Guilders
Independent Variables in Current Guilders.
Coefficient

t-Statistic

p-value

Flow Variables
1. EXPENDITURES
2. DIVIDENDS
3. SALES

0.243575
0.086721
0.001038

2.854951
0.588119
0.013216

0.0079
0.5610
0.9895

Levels at Year-Start
4. INVENTORY
5. CASH
6. CREDIT DUE
7. TOTAL DEBT

-0.057136
-0.158387
-0.402999
-0.006557

-1.495904
-0.823348
-1.614495
-0.141776

0.1455
0.4170
0.1172
0.8882

N= 36

Adjusted R-squared
Durbin-Watson

0.365084
1.778873

Source: See Appendix A.

Given the relationship between AWB lending and VOC expenditures, the economic benefit
from expanded seasonal lending should have been expanded VOC investment in expeditions. To
visually check this, Figure 13 plots for each of our sample years VOC expenditures on the horizontal and AWB lending to the VOC on the vertical. While noisy, more expenditures do seem to
follow an expanded credit policy by the AWB: the series’ simple correlation is +0.56. Unfortu40

VOC borrowing totals follow the VOC’s fiscal year rather than the AWB fiscal year reported in van Dillen (1934,
979-984).

nately wee do not kno
ow exactly where
w
bank looans fit into the VOC’s capital
c
structture, e.g., the
seniority of bank loan
ns relative too other kindss of debt. Buut the VOC’ss frequent boorrowing poosthe ready avaiilability of bank
b
credit contributed too the companny’s ability to
1683 sugggests that th
manage its
i cash flow
ws and outfit ships.

Fiigure 13. AW
WB Lending and VOC
C Expenditures, 1666 too 1702

Sources: See Appendix A.
A

Pullling the elem
ments of thiss section together, we finnd that the neew regime allowed
a
the bank
b
to expandd seasonal leending to thee VOC and pay
p large divvidends to thhe city whilee slightly redducing its agggressiveness relative to its assets. To see this, reeturning to figure
fi
12 andd consider thhe
vertical distance
d
betw
ween the loan/asset ratioo and the cappital/asset rattio as the bannk’s overall aggressivenness: the sum
m of leverageed lending (lloans not baccked by capital) and cappital extractioon
(liabilitiees not backed
d by assets). This spreadd averaged 18 percent in our sample years beforee

receipts (1666 to 1683) and 16 percent for our years after (1683 through 1702). The bank could
do more with less because of the surge in demand for receipts and fiat bank money.
4.2 Monetary policy
The original and overriding policy goal of the Bank of Amsterdam was to maintain a stable
value of bank balances—the settlement medium for financial transactions within the city. The
pre-1683 monetary regime partially fulfilled this goal by eliminating the inflationary trend that
prevailed in the early decades of the seventeenth century. However, a defect of this regime was a
persistent “undervaluation” of bank money: high withdrawal fees meant that the market value of
the agio could fall as much as 1.5% below its statutory value before triggering a corrective market response (see figures 3 and 5). Figure 14 plots the empirical density of the agio and indicates
that before 1683, its market value rarely approached its statutory level of about 5 percent.
Figure 14. Estimated densities for the agio
1.00

0.75

0.50

0.25

0.00
2.5

3.0

3.5

4.0

4.5

1666:2-1683:7

5.0

5.5

6.0

1683:8-1703:2

Source: see Appendix A. Estimated densities are histograms, smoothed with Gaussian weights. Outlier values are
not shown. Shaded area is the post-1683 target zone suggested by van Dillen (1934).

The post-1683 regime was associated with higher levels of the agio, but it is not clear how
much of this change in valuation can be attributed to deliberate policy actions by the bank. Van
Dillen’s (1934, 102) description of the bank’s policy is reminiscent of the operations of a modern
31

6.5

currency board: “… for many years [after 1683], they bought in bank money when the agio fell
to 4 1/4 percent and sold whenever it rose to 4 7/8 percent.” As can be seen from figure 14, however, the data are not consistent with a simple “currency board” characterization: most of the
time the market agio lies outside its putative target band (shaded). Moreover, there is evidence
suggesting that much of the post-1683 change in the behavior of the agio was simply the result of
arbitrage. We now consider this evidence in more detail.
4.2.1 Agio arbitrage
To illustrate coin-to-bank money arbitrage, we consider the two coins that anchored the
Dutch system of trade coins: the silver dukaat and the silver rijder.41 Mint data on these coins is
reported Polak (1998), and Table 5 gives some basic information for each coin.
Table 5. Implied Agios for Two Silver Trade Coins
Dukaat

Rijder

2.5
2.4

3.15
3.0

Implied deposit (statutory) agio (α )

4.17%

5.00%

⎛1+ α
⎞
Implied withdrawal agio ⎜
− 1⎟
⎝1+ w ⎠
with w = 1.5%
with w = 1.5%, and
a rijder-specific fee of 1%
with w = 0.25%

2.63%

3.45%

Statutory Values
in current guilders
in bank guilders

2.44%
3.91%

4.74%

Source: Polak (1998, 73-4).

The mint ordinance assigned two values to each coin.42 The ratio of the current guilder
value over the bank guilder value (less 1) gives the implied statutory agio α for each coin. If the
41

We emphasize that many other types of coin were deposited in the bank, especially after the introduction of receipts.

bank charges w > 0 at withdrawal, then the (steady-state) market agio a should lie in the interval43

( a, a ) ≡ ⎛⎜⎝ 11 ++ αw − 1,α ⎞⎟⎠ ,

(1)

if the coin is to reside in the bank. Table 5 reports the upper and lower steady-state boundaries
for each coin assuming w = 1.5%. A market agio above 4.17 would encourage the deposit of
dukaten, an agio below 3.45 would encourage the withdrawal of rijders, and an agio in between
would create no arbitrage incentives. Recall also that the AWB could assess an additional fee on
popular coins at withdrawal, so an additional premium could reduce the rijder’s lower bound to
match the dukaat’s lower bound. Thus, for the pre-1683 period, the two-coin steady-state interval

(

)

(intersection of the single-coin intervals) would have been α = 2.5%;α = 4.17% . Figure 14
shows that the agio rarely fell below the lower bound during this period, but often moved beyond
the upper bound. The agio distribution shifts rightward after 1683, but its overall shape and upper-bound violations were retained. Let us consider why the distribution changed in this fashion.
4.2.2 Agio mean
The 1683 reduction in fees forced a change in the agio’s steady-state equilibrium. A fee of
0.25 percent (the new standard for silver coins) caused each coin’s arbitrage bounds to tighten.
Returning to the dukaat and the rijder (table 5), no market agio now existed at which both coins
could remain free of arbitrage pressures. For example, an agio of 4.5 would encourage the deposit of dukaten (pushing down the agio) and the withdrawal of rijders (pushing up the agio).
Low fees pushed a corner solution: either the agio would settle around 4 percent when the AWB
42

Ordinances also assigned each coin a metal content that could affect the steady state properties of the agio, but this
issue does not pertain when the price of silver is within a coin’s mint equivalent and mint price. For a full analysis,
see appendix C.
43
After 1683, the cost of a withdrawal would include the market value of a receipt. Hence in practice the agio could
fall slightly below the lower endpoint in (1) without violating no-arbitrage.

ran out of rijders or it would settle around 5 percent when the stock of circulating coins ran out
of dukaten.
The post-1683 density of agio in figure 14 shows that higher range predominated. We cannot say if the AWB intended for the lower fees to push the agio to a new center, but the bank did
accept the new reality. For example, in January 1687, the AWB switched the agio it used for
internal record keeping from 4.25 to 5.44 Similarly, for the three-gulden, a coin very similar to
the rijder, the AWB chose an agio of 5.26 percent.45
The shift to a higher agio is surprising at first glance, for the transition period began with
no rijder receipts and no arbitrage incentive to create them. Indeed, the agio remained around 4
percent until 1685. The answer is to also note that the new regime created an increased demand
for deposits, but mint ordinances favored the production of rijders. 46 The two coins had the same
official mint price, but rijders had a seigniorage rate of 1 percent while the dukaat’s rate was 0.2
percent.47
To see that profits mattered, figure 15 plots the production of dukaten and rijders by the six
Dutch provincial mints from the introduction of the two coins in 1659 to the advent of receipts in
1683.48 It shows rijder production outpacing dukaat by 2 to 1. Dukaat production is largely limited to the introductory period just after 165949 and a surge in emergency minting (much of it by
the government) during 1672 and 1673. The rijder also sees emergency minting in 1673.

Amsterdam Municipal Archives inventory number 5077/1322, f. 9.
The AWB recorded 3-gulden coins at 2.85 bank guilders (AMA 5077/1322, f. 43).
46
With a low mint equivalent, dukaten were also favored for export.
47
As of the 1668 mint ordinance, both coins had a mint price of 24.873 guilders per mark (Polak 1998, 174-5). The
mint equivalents were 24.933 for the dukaat and 25.131 for the rijder.
48
The series does not capture all Dutch mint production, and incorporates smoothing of some multi-year production
figures, so it is more indicative than exhaustive.
49
From 1659 to 1668, the dukaat was subsidized in that in that the States General taxed rijder production at 0.158
guilders per mark and dukaat production at 0.026 guilders per mark (Polak 1998, 174-5). This tax ended in 1688.
45

Figure 15. Annualized Production at Provincial Mints
200,000
180,000
Marks Pure Silver

160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000

Dukaat

1683

1681

1679

1677

1675

1673

1671

1669

1667

1665

1663

1661

1659

Rijder

Source: Derived from Polak (1998, 103-164).

The paucity of dukaat coins limited the ability of AWB customers to favorably deposit dukaten as the agio rose above 4.17 percent. At the same time, the new regime promoted deposits,
so rijders dominated. To show this, figure 16 plots a measure of the types of coins deposited
through use of yet another filtering algorithm: one built around sacks of coins. The 200 coin sack
was the standard bulk unit, so a sack of dukaat coins was worth 480 bank guilders and a sack of
rijders 600 bank guilders. We filtered the population of deposit transactions for amounts of exactly 480, 600, or their multiples up to times ten. Each observation is then converted into sacks,
so, for example, 960 bank guilders converts into two sacks of dukaten. The sacks are then aggregated by month, and the joint-multiples of 2,400 and 4,800 are excluded. The result, Figure 16,
shows that rijder deposits predominated when deposit amounts were low or high. Moreover,

deposits did respond to arbitrage opportunities. When the agio flirted with 5 percent in 1670 and
1671, dukaten were attracted, but the much larger effect was the in-rush of rijders.
Figure 16. Filtered Sample of Deposits by Month by Coin
101

Sacks of Coins

Rijder

Feb-02

Feb-00

Feb-98

Feb-96

Feb-94

Feb-92

Feb-90

Feb-88

Feb-86

Feb-84

Feb-82

Feb-80

Feb-78

Feb-76

Feb-74

Feb-72

Feb-70

Feb-68

Feb-66

Dukaat

Source: Authors’ calculation.

To summarize this sub-section, the tremendous drop in fees in 1683 created an arbitrageinduced corner solution. The rijder equilibrium won because the importance of agio-arbitrage
was conditional on the minting environment. Few dukaat coins were in circulation at the time to
meet the surge in demand for deposits, so the mean agio eventually moved towards the rijder’s
implicit agio of 5 percent.50

The scarcity of dukaten also helps explain the asymmetry in agio observations above the dukaat’s upper agio boundary (4.17), for the rijder’s range topped at 5 percent.
50

4.2.3 Agio dispersion
If the rijder’s no-arbitrage boundaries set the agio’s trading range, then the reduction in
fees in 1683 should have tightened the range (see Table 5), and the agio’s variance should have
also tightened. It did not until after 1693. Again, we think minting can help explain the high
agios from 1685 to 1693.
From 1676 to 1693, some mints, especially Zeeland’s provincial mint, began producing
coins with higher mint prices than traditional dukaten or rijders.51 These “light” coins were an
effort to gain revenue.52 To get a sense of this, figure 17 plots the production of silver at the provincial mints in the form of traditional coins (dukaat, rijder, and gulden) and as the new, rival
coins (arendsdaalder and florijn).53 The lighter (high mint equivalent) coins were displacing
traditional coins until Holland refused to recognize their legal status in 1690, and the entire
United Provinces banned their production in 1694.54

These new coins were large trade coins distinct from the small schellingen and stuivers referenced in footnote 26.
A different version of the problem was the province of Overijssel debasing gulden coins in the late 1680s.
53
Again, the caveats in footnote 48 apply.
54
The data also suggest that sorting out the monetary uncertainty stimulated new minting.
52

Thousands of Marks Silver

Figure 17. Annualized Trade Coin Production at Provincial Mints
300
250
200
150
100
50

Traditional Silver

1701

1699

1697

1695

1693

1691

1689

1687

1685

1683

1681

1679

1677

1675

Light Silver

Source: Derived from Polak (1998, 103-164).

The new coins undermined the silver content of circulating current money, so the agio rose
to historic highs. The AWB returned to its original role of sheltering creditors as agio-arbitrage
and low fees encouraged deposits of rijders and dukaten (figure 16). The agio got so high that it
paid to mint dukaat coins just to deposit them at the AWB.55 The agio peaked at 12.5 percent in
January 1693 and hovered around 6.25 during the third quarter of 1693. Dukaat production at the
provincial mints56 surged in 1693 and 1694, and we think the high agio drove the activity because rijder production did not surge. Again, rijders usually dominated production (figure 15).
The dukaat’s only advantage was an attractive agio when deposited at the AWB (table 5).

This effect does not include the Zeeland dukaat. In 1672, Zeeland raised the ordinance value of its dukaat to 2.55
current guilders (Polak 1985, 73). With the end of arensdaalders in 1694, Zeeland switched to minting these “criedup” dukaten.
56
As a caveat, we are unable to say if the rijder deposits from 1676 to 1690 include some arensdaalders.

After 1693, observed agios stabilize between 5.25 and 4.38 for the rest of our sample period.57 The high agios in our post-1683 sample reflect instability in the quality of current coins
that gets sorted out in 1694. Otherwise, the agio distribution stays centered on the arbitrage
boundaries set by the rijder coin.
4.3 Open market operations
The presence of arbitrage effects does not exclude the possibility that the bank sought to influence the agio through open market operations. Historical accounts (van Dillen, Mees, and
others) agree that such operations occurred but are mute regarding their manner and extent. Our
reconstruction of master account transactions points to the AWB buying and selling bullion
rather than coin. Open market operations meant that the AWB would sell (buy) bullion below
(above) the market price and decrease (increase) the quantity of bank guilders.
To what end? The AWB could attempt to stabilize the agio. Alternatively, the bank could
mute the impact of fluctuations in bank money by offsetting deposits with bullion sales and
withdrawals with bullion purchases, i.e., the bank could “sterilize” these flows in modern parlance (see, e.g., Hamilton 1997). The bank could similarly sterilize changes in VOC credit. This
section presents evidence that the bank used bullion operations to pursue all three goals, and that
the fiat money standard facilitated these operations by allowing more aggressive bullion sales.

Our interpolated agios in Figure 3 are erratic around 1696 because the pound-bank guilder exchange reflected
great monetary difficulties in England. England was experiencing a liquidity crisis as the Great Recoinage, begun in
1695, temporarily reduced the stock of circulating coins. For example, the Bank of England suspended convertibility
in 1696 (Clapham 1944, 36).

4.3.1 Operations in bullion
Why trade bullion rather than coin?58 Trading coin would have violated the bank’s fundamental assignment of respecting and maintaining the mint ordinance values of coins. In contrast,
bullion could be traded without necessarily upsetting the circulation of coins at all. To see this,
suppose that a coin from the preceding section contains b ounces of silver. Also, note that when
mints offer to convert silver to coin, they collect a fraction σ of the silver as seigniorage. If we
take the market agio as a and we normalize the coin’s face value to unity, then the steady-state
price of silver γ (expressed as bank guilders per ounce) lies in the interval59

(γ , γ ) ≡ ⎛⎜⎝ b1(1−+σa) , b(11+ a) ⎞⎟⎠ .

(2)

The bank had to take these limits into account in its open market operations if it did not want to
disrupt the circulation of coins.
The 1683 reform eased these constraints. Receipts allowed the AWB to purchase existing
options to withdraw coins, so the stock of potentially circulating coins could be reduced without
the bank offering an unofficial price. Lower fees also allowed the AWB to more easily “tighten”
by selling bullion. To see the effect of lower fees on the range of bullion sale prices, insert the
lower bound (a) for the agio in (1) into (2) to get bounds on the steady-state price of silver γ
when the agio is at its steady-state minimum:
⎛
⎞
⎜ 1−σ
⎟
1
⎜
⎟.
,
⎜ b⎛ 1+ α ⎞ b ⎛ 1+ α ⎞ ⎟
⎜ ⎜ 1+ w ⎟ ⎜ 1+ w ⎟ ⎟
⎠ ⎝
⎠⎠
⎝ ⎝
58

(3)

Why not trade in government debt? Holland had no secondary market for sovereign debt in this era (Gelderblom
and Jonker 2010).
59
I.e., γ lies in an interval formed by the mint price of the coin and the mint equivalent of the coin, converted to
bank guilders at the market agio. See e.g., Redish (1990), Sargent and Smith (1997), or Sargent and Velde (2003) on
the derivation of interval (2).

The decrease in w decreased the lower bound γ = (1 − σ ) (1 + w) / [b(1 + a)] in (3), allowing the
AWB to more easily sell bullion at a price above the mint’s purchase price.
Receipts also eliminated the need for coin-specific premia by ending cross-coin substitution. To see why, assume two coins with (bank) nominal value/metal pairings of ( x1, b1 ) and

( x2 , b2 ) . Under traditional withdrawal rules, coin 1 needs a fee

⎛b x
⎞
w1 ≥ max ⎜ 1 2 − 1,0 ⎟ to avoid
⎝ b2 x1
⎠

coin-to-coin arbitrage. The receipt system avoided the problem by making all withdrawal claims
a claim to a specific coin. All together, lower fees simultaneously tightened the agio ( ↑ a ) and
eased the bank’s ability to sell bullion ( ↓ γ ) when the agio was low: near a . Also note that the
effect is asymmetric, for reducing fees does not alter a , (i.e., the upper bound in (1)) or γ (the
upper bound in (3)) when the agio is high.
4.3.2 Evidence of open market operations
Returning to the data, the integrated series on purchases and deposits, graphed in Figure 8,
provide a narrative to the bank’s open market activity. Before 1683, open market activity seems
to have had a defensive character. “Reserves” of metal were accumulated by large purchases at
favorable times. Purchased metal was rarely drawn down through sales, the chief exception being the years 1680-83, by which point virtually no coin was being deposited (see Figure 5) and
cumulated deposits were approximately zero (Figure 8). After 1683, infrequent spikes in purchases continue as before, but these are followed by lengthy periods over which the bank is a net
seller of metal (1685-87, 1691-94, 1695-98, 1699 onward). By then the bank apparently felt
more comfortable parting with its metal purchases than it did before the 1683 reform.
Months with the largest purchases and sales are cataloged in Table 6 below.
41

Table 6. Potential Large Open Market Operations
5a. Bullion Purchases/ Sales of Bank Money
Month
May-68
Aug-70
Sep-70
Dec-79
Feb-80
Oct-85
May-94
Oct-98
Nov-98

Size (guilders)
1,437,506.25
815,231.20
1,415,986.48
994,726.08
807,539.45
1,909,653.70
1,022,275.45
706,765.30
899,359.70

Size
(% total balances)

Agio

24%
12%
18%
17%
10%
29%
9%
5%
6%

4.00
4.72
4.90
4.47
4.44
5.13
4.69
5.00
5.19

Compared to
Agios
+/- 12 months
Highest
High
High
Highest
High
High
Low
High
High

5b. Bullion Sales/ Purchases of Bank Money
Month

Size (guilders)

Size
(% total balances)

Nov-67
Sep-70
Nov-75
Nov-77
Nov-81
Dec-86
May-91
Nov-94

340,681.90
573,082.22
308,633.05
409,548.10
501,789.50
612,842.55
450,312.75
300,312.27

5%
7%
6%
7%
7%
6%
4%
2%

Agio
3.19
4.90
3.53
3.75
3.63
5.25
5.25
4.75

Compared to
Agios
+/- 12 months
Lowest
High
Low
Low
Low
High
Low
Low

Notes: Operations are classified as “large” if they are more than 3 standard deviations above the series mean. Agios
with italic font are same month; normal font is closest month available.

A case-by-case examination indicates that these exceptional transactions almost always
leaned against the wind: metal was purchased during periods of high agios, and vice versa.60 In
addition, the AWB’s large purchases are often approximately offset by large deposit outflows,
and vice-versa for large sales. Net purchases and net deposits almost exactly line up on a negatively sloped 45º line for many high-value observations, both before and after 1683 (figure 18),
consistent with the hypothesis that these were essentially sterilization operations.
Figure 18: Net Purchases versus Net Deposits (Bank Guilders)
1666:2-1683:7

1683:8-1703:2

3000000

r = -.36

2000000

1000000

Net Purchases

r = -.29

-1000000

-2000000
-3000000

-2000000
-1000000

1000000

-3000000

Net deposits

-1000000

1000000

Net Deposits

Source: Appendix A.

Offsetting of purchases and balances is confirmed in a more formal exercise in which a
standard vector autoregression was fit to the four principal data series (the agio, VOC debt, cumulated deposits, and cumulated purchases). The VAR was fit over a sample that includes all
available observations on balances, except the two outlier episodes in 1672 and 1693. The specification includes monthly dummies and 2 lags.61 Stationarity of the model coefficients across the

Exceptions are the large bullion purchase in May 1994 and sales in September 1670 and December 1686; however, these transactions represent partial unwindings of transactions in the opposite direction during the same or
previous month.
61
The 2-lag specification is chosen under the Akaike, Hannan-Quinn, and Schwarz criteria; sequential likelihood
ratio tests choose more lags.

1683 break is strongly rejected by a classical likelihood ratio test (p<.001).62 36-month impulse
responses from the two VARs (pre- and post-1683) are graphed in figure 19. Responses shown
are for a Choleski decomposition of the forecast error variance-covariance matrix with the agio
first in the ordering. 63
Figure 19. Sample impulse responses
1666:2-1683:7
Agio

VOC debt
0.30

0.30

0.25

0.20

0.15

0.10

Responses of

0.10

0.05

0.00

-0.05

-0.10
5

-0.10

300000

250000

200000

150000

100000

150000

100000

50000

-50000
-100000

-150000

250000

200000

150000

100000

50000

-50000

-100000

-150000

-200000
5

-200000

300000

200000

100000

-100000

-200000

Agio

VOC debt

Agio

VOC debt

-200000

-300000

-100000

-200000

-300000
0

-100000

-200000

-300000

-200000

300000

-100000

-50000
-100000

-150000
0

50000

-50000
-100000
-200000

250000

200000
150000
50000

-50000
-100000

50000

-50000
-100000
5

100000

50000

150000

100000

50000

0
-50000
-100000
0

Purchases

0.15

0.10

0.05

0.00

Deposits

0.15

0.10

0.05

-0.05
-0.10

VOC debt

Purchases

0.30

0.15

Agio

Deposits

0.30

-300000

Deposits

Purchases

1683:8-1703:2

Agio

0.5

0.4

0.3

0.2

0.1

Responses of

0.2

0.1

0.0

-0.1

500000

400000

300000

200000

100000

-100000
0

35
400000

300000

200000

100000

-100000

-200000

250000

200000

150000

100000

50000

-100000

-150000

Agio

VOC debt

-50000

-100000
-150000
5

-50000

-100000
-150000
0

50000

-50000

250000

200000
150000

-50000

100000

0
-100000

200000

100000

0
-100000

400000

200000

-100000
0

400000

100000

-100000
0

400000

200000

Purchases

0.2

0.1

0.0
-0.1

-100000

Deposits

Purchases

0.5

0.4

VOC debt

Deposits

0.5

Deposits

Purchases

Noteworthy in figure 19 are the persistently negative responses of purchases to shocks to
deposits, both before and after 1683, consistent with the idea that the bank’s open market opera-

Stationarity of coefficients is also rejected under the Akaike and Hannan-Quinn criteria; however stationary is
favored under the Schwarz criterion.
63
The graphs depict posterior mean responses under a diffuse prior, together with ninety percent posterior error
bands.

tions worked to smooth short-term fluctuations in the money stock. Shocks to deposits are less
persistent after 1683, perhaps reflecting greater efficacy of the bank’s operations after the transition. Post-1683 shocks to VOC balances also induce sales of metal by the bank, suggesting that
these fluctuations were partly sterilized. Also of interest are the responses of purchases to shocks
to the agio. These are persistently positive, implying that the bank added funds to the market
when bank balances became unexpectedly scarce, and drained funds when money was plentiful.
Summarizing this section, our analysis suggests that the bank conducted open market operations throughout the sample period, with some purchase operations in particular being quite
aggressive. There is a strong negative correlation between shocks to deposits and shocks to purchases, indicating that the motivation for many of these operations was to smooth fluctuations in
the money stock rather than to stabilize the agio. The 1683 regime change both encouraged deposit flows and eased arbitrage constraints on the bank, allowing the AWB greater latitude to sell
off purchased metal.

5. Connections to the literature
The above analysis invites comparison to similar analyses of U.S. macro time series before
and after the 1913 founding of the Federal Reserve. Numerous studies (e.g., Clark 1986, Miron
1986, Mankiw, Miron, and Weil 1987) have documented that U.S. interest rates become extremely persistent and virtually aseasonal starting in 1914, while monetary aggregates display
increased seasonality. These changes are often attributed to Federal Reserve policies, especially a
quasi-pegging of short-term interest rates through the opening of the discount window.
Figures 5 and 6 show that comparable shifts do not occur around 1683, except in the increased seasonality of VOC loan balances. Constancy in seasonal patterns for the other two
45

components of the money stock is consistent with the more evolutionary nature of the 1683 policy change, and the AWB’s restriction of seasonal lending to a single counterparty.
The VAR analysis reported in Canova (1991, 700-701) (see also Tallman and Moen 1998)
finds that before 1914, external shocks to high-powered money are highly causal for the U.S.
domestic money stock, but that this same effect is greatly diluted after 1914. We cannot fully
replicate Canova’s exercise due to data limitations (monthly observations on key macro series
such as output and prices are unavailable), but figure 15 displays some similarity to the pre-1914
U.S. case: favorable shocks to the agio (to the extent these originate abroad) have a persistent
positive impact on money. In contrast to the post-1914 U.S. experience, however, this pattern
attenuates somewhat but does not disappear after 1683.
Some aspects of the AWB’s operations resemble those of modern currency boards. E.g.,
the Hong Kong Monetary Authority has standing offers to sell Hong Kong dollars at a unit price
of US $0.129 and to repurchase its money at a 1.27% lower price, roughly matching the AWB’s
pre-1683 statutory bid-ask spread. The receipt system evidently allowed the bank to function
with a lower “backing ratio” of external assets to central bank money than do modern currency
boards, which often operate with a backing ratio of 100 percent or more.
Currency boards can be effective in stabilizing monetary value, but a commonly cited defect is their inability to ward off banking crises (Chang and Velasco 1999, 2000). Yet no widespread banking crises occurred in Amsterdam during the period we analyze. This is perhaps due
to Amsterdam’s reliance on a web of informal trade credit and personal guarantees (bills of exchange) for business financing, rather than deposit banks. And, as has been demonstrated, the
AWB could and did indirectly ease credit conditions by providing financing to the largest enterprise in the economy.

In the eighteenth century, Amsterdam expanded its credit markets at the cost of increased
financial fragility. A system of “acceptance credit” developed, under which bills of exchange
were guaranteed against default (“accepted”) by one of a small number of prominent local merchants, lowering the chances of a single default but concentrating credit risk in a small number of
counterparties. A full-fledged financial panic developed in 1763 after the failure of a prominent
acceptance house; the AWB could do little in response (Schnabel and Shin 2004).

6. Epilogue and conclusion
The innovations of 1683—the move to a de facto fiat standard—made it possible for the
Bank of Amsterdam to conduct credit and monetary policy on terms comparable to modern central banks. Our analysis shows that this change allowed the bank to lend with little if any capital,
and to counter money outflows through sales of its metal stock. The weakness of this system lay
in its dynamics: having no natural endowment of precious metal, Amsterdam’s liquidity required
access to external supply of silver. Following the outbreak of the Fourth Anglo-Dutch War in
1780, silver inflows were curtailed and the bank’s loans to the East India Company sharply expanded, even as chances of their repayment diminished. Erosion of confidence led to a sharp
depreciation of the bank guilder, and by 1795 the world’s first great experiment with fiat money
largely had come to an end (van Dillen 1934, 112-115).
Does the Amsterdam experience offer any insights for monetary policy today? Our answer
is yes, precisely for the reason that, as first movers, the masterminds of the 1683 reform could
construct a fiat money scheme unburdened by any modern ideas about central banking. The resulting system, conceived in this “state of nature,” emphasized straightforward policies adapted
from earlier experience under a commodity standard. In monetary terms, the bank acted to in-

crease the market value of its liabilities, i.e., the agio, in terms of externally valued collateral. In
credit terms, the bank lent in restrained amounts, though on generous terms, to a blue-chip (and
government-sponsored) borrower. Profits from these activities were quietly returned to the
bank’s sponsor, the City of Amsterdam.
Simplicity was the hallmark of the bank’s operations. There was little need for policy
statements, elaborate targeting schemes, or exit strategies. Paradoxically, secrecy also played a
role: while the general intent of the bank’s operations was public information, its financial condition was not. Many contemporary observers, Adam Smith included, believed the AWB to possess a stock of metal far in excess of its actual holdings, and the bank’s true condition was revealed only after its final collapse. Until that point, the managers of the world’s first big fiat
money factory seem to have absorbed a lesson familiar to today’s high-tech mavens: for a virtual
good, reputation is everything.

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Supplementary material for

How Amsterdam got Fiat Money

Stephen Quinn, Texas Christian University
William Roberds, Federal Reserve Bank of Atlanta

Appendix A: AWB Accounting
I.

The Balance Sheet
The AWB fiscal year ended in January, so the bank’s balance sheet sums categories on

January 31. In bank guilders, the AWB reported its assets as metal held and loans due, its liabilities were account balances, and the residual was capital. See Table 1 in the text for an example.
Van Dillen (1925: 701-807) reproduces these from AWB records, and we have consolidated
them for our sample period in Table A1.
Because the balance sheet is a double entry system, changes in year-to-year balances have
an offsetting change in another category. Bank operations that alter the balance sheet can be organized within a matrix intersecting balances, metal, loans and capital. Figure A1 shows the possibilities and assigns different AWB operations to the appropriate categories. Traditional deposits
and withdrawals are only the start.

Figure A1. Cross-Category AWB Operations
Balances

Capital

Metal
Deposits
Withdrawals
Bullion purchases and sales
Fee Revenue
Holland Interest
Most Expenses
Special Deposits
Open Market Profit/Loss

Loans
“Account” Lending:
All VOC, Some Amsterdam

Capital
VOC Interest
Some Expenses

Interest Due
Loan Write-Offs

“Metal” Lending:
All Holland, All Miscellaneous,
Some Amsterdam

Loans

Loans
Loans were granted by creating account balances (VOC) or by releasing metal (Holland).
Amsterdam used both techniques. Principal repayment reversed the process.

Capital Accumulation
Capital grew through the bank’s retained earnings. Interest payments by account eliminated
bank guilders while interest payments by metal increased the bank’s metal stock. If the bank
54

considered interest due on January 31, then the AWB added the interest due to the loan’s principal and to the bank’s capital at that time. Other revenue from fees on withdrawals, account overdrafts, receipts and money changing were collected in coin, so the metal stock increased from
those operations.

Capital Extraction
Removing capital was the prerogative of the City of Amsterdam. When the city decided to
extract retained earnings, it did so by “borrowing” from the AWB at no interest instead of reducing capital. It appears the city did this to avoid explicitly putting the AWB into a negative capital. This situation seems to have evolved. In the early 1650s, the city borrowed around 2 million
guilders from the AWB to help build a new city hall (and home for the bank) on the Dam. Soon,
the city stopped paying interest, for why pay your own bank? Beginning in 1685, when retained
earnings had built sufficient capital, the city had the AWB write off both capital and some of the
bank’s outstanding loans to the city until the AWB’s book capital was again near zero, but not
negative.
We agree with Willemsen (2009) that the city’s taking of metal and creating of balances
should be treated as capital extraction rather than as loans. To see the consequences of this interpretation, we calculate adjusted values for capital, loans, and assets. Adjusted capital subtracts
the money from capital when the operation occurred instead of when the AWB later wrote-off
the loan. Adjusted loans do not add the city as a borrower and do not subsequently write down
those loans. Adjusted assets use the adjusted loans series: metal stock plus adjusted loans. Adjustment also ignores VOC interest due, but that is a minor issue.
To create a monthly series, known changes in balances, loans, capital and metal have been
applied to year start values. This information came from Van Dillen (1925: 701-807), extant balance books (Amsterdam Municipal Archive 5077/1311 through 1323), and our reconstruction of the
flow of balances described in Section II below.
We do not know the intra-year dispersion of non-interest profit, so we distributed the annual change per month by withdrawal weight. The logic being that withdrawal fees were the
largest non-interest source of revenue. For years we lack complete withdrawal information, the
annual non-interest profit was evenly distributed per month. Discrepancies in balances and metal

are ignored within a year, and all levels are updated to reported levels (van Dillen 1925) at year
start. We did not calculate book capital by month, so that series is only reported at year start.
Figure A2 compares book and adjusted capital-to-asset ratios. Figure A3 compares book
and adjusted loans-to-asset ratios.

Figure A2. AWB Monthly Capital-to-Asset Ratios, 1666 to 1703
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%

Adjusted Capital/Asset

Book Capital/Asset

Source: Derived by authors from van Dillen (1925, 701-807).

1-Feb-02

1-Feb-99

1-Feb-96

1-Feb-93

1-Feb-90

1-Feb-87

1-Feb-84

1-Feb-81

1-Feb-78

1-Feb-75

1-Feb-72

1-Feb-69

1-Feb-66

-20.0%

Figure A3. AWB Monthly Loan-to-Asset Ratios, 1666 to 1703
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%

Book Loan/Asset

1-Feb-02

1-Feb-99

1-Feb-96

1-Feb-93

1-Feb-90

1-Feb-87

1-Feb-84

1-Feb-81

1-Feb-78

1-Feb-75

1-Feb-72

1-Feb-69

1-Feb-66

0.0%

Adjusted Loan/Asset

Source: Derived by authors from van Dillen (1925, 701-807).

The AWB balance sheet, however, does not communicate two important categories of information: gross flows and intra-category activity. The next sections report our efforts to reconstruct
gross flows between bank accounts and the other balance sheet categories (see Figure A1).

II.

The Specie Kamer
To account for the creation and destruction of bank guilders, the AWB used a master ac-

count called the Specie Kamer (or Kammer or Camer) that translates as specie room. Specie
Kamer transactions are the top row of Figure A1: deposits and withdrawals (account-metal),
VOC and some Amsterdam loans (account-loan), VOC interest payments and some AWB ex57

pense payments (account-capital). The bulk of this paper’s evidential contribution has involved
using the Specie Kamer to reconstruct these transactions. This section details how we did this
and what we found.
The Bank of Amsterdam organized its books by half-year increments: February through
July, August through January. By the 1700s, the bank needed 3,000 pages to record each halfyear of bank activity. The amount of information in the ledgers is staggering. Fortunately for our
purposes, the Specie Kamer master accounts are only a few pages per ledger.

Receivers
The bank used two sets of accounts to represent itself. When customers brought a deposit
to the bank, the bank usually debited an account in the name of the employee who received the
metal. Most years, the bank had two or three such receivers, and this system began in the 1620s.
When metal left, the Bank of Amsterdam credited the Specie Kamer. As a result, the combination of receiver debits and the specie room credits gives the changes in the amount of bank
money. Figure A4 offers a schematic of the flow of metal and bank money through the bank.
Table A3 lists the 74 ledgers and 812 folios used in this study. All ledgers are stored at the Amsterdam Municipal Archives, and the archive retains dissemination rights over the images. The
folios were digitally photographed and then encoded.

Figure A4. Standard Metal Flow through the Bank of Amsterdam
Bank of Amsterdam

Metal
Deposit
Customer

Metal
Bank
Receiver

Specie
Kamer

Bank
Money

Withdrawal
Customer
Bank
Money

Here is an example of how the deposit process worked. On 23 May 1687, Arthur Woodward
received metal worth 480 bank guilders from Samuel Cohen (5077/109, f.1407). Cohen’s account was credited and Woodward’s account was debited. The ledger does not report what
Cohen deposited, but it was likely a sack (a standard unit for bulk coins) of 200 silver Dukaat
coins at 2.4 guilders each. If so, then Cohen also should have received a receipt granting the option to buy 200 Dukaten from the AWB for 480 bank guilders. We say should because the account ledgers never mention receipts. Two weeks later, on June 6, Woodward transferred 46,800
guilders in metal to the Specie Kamer: Woodward’s account was credited (5077/109, f. 1445)
and the Specie Kamer debited (5077/109, f. 1431).

Non-Metallic Guilder Creation
Some guilder creation, however, did not involve incoming metal, and the AWB recorded
these directly in the Specie Kamer account and bypassing the receivers. For example, when the
VOC borrowed money from the AWB, the VOC’s account was credited and the Specie Kamer
was debited. To create our borrowing and repayment series, we separate account loans from deposits and repayments from withdrawals.
For some years, extant AWB records tell exact loan creation, repayment and interest payments (AMA 5077/1311 through 1323), so we found the matching transactions. For other years,
59

van Dillen (1925, 979-84) provides total VOC borrowing, repayment and interest, so the matching transactions can be readily found, for the transactions were labeled VOC, and borrowing
occurred in 100,000 guilder increments, with the rare exception of a 50,000 increment. Repayments are similarly named and carry the correct amounts for interest.
For the remaining years (1671 through 1675 and 1683 through 1684), the challenge is accounting for loans when we have only year start and year end debt levels. For these years, we
have looked for 1) large, round VOC debits and 2) offsetting VOC credits that include the correct interest that 3) combine to leave the correct debt outstanding. Table A4 reports the loans we
have identified. The interest rate was a consistent 4 percent except for anticipations in the mid1670s (de Korte 1984, 66), and the internal rates of return reflect that rate. Finally, we note that
the ledger for August 1684 to January 1685 is missing and detailed summaries are missing, so
we know nothing about that period except that 400,000 guilders in principal was retired.
Occasionally, the City of Amsterdam also created accounts without depositing metal. As
with the VOC, the AWB credited the City of Amsterdam by debiting the Specie Kamer. These
transactions are detailed in the bank’s balance book records (AMA 5077/1311 through 1323), so
we can separate them from metal transactions. Table A5 lists the municipal transactions that
changed the supply of guilder (account transactions). Table A5 also lists when the city moved
metal in or out of the bank but did not change the guilder money supply (metal transactions).
Combining these two transaction types gives the full accounting of the city’s extraction of capital
from the bank.

Bullion
After removing 1) loans and 2) transfers from receivers, the debit side of the Specie Kamer
still contains some direct deposits that avoid the receivers. We lack a contemporaneous description of why some deposits were processed through receivers while others were not, but we think
that bullion was directly deposited into the Specie Kamer while coins went through the receivers.
To begin, the use of receiver accounting begins in the 1620s, so the distinction predates receipts
or the agio. Next, the direct deposits are far more likely to involve a remainder less than a guilder, and even less than a stuiver (1/20th of a guilder). In contrast, receivers see far more large
round deposits. Table A6 measures this dramatic difference through the percent of deposit transactions by depository channel that fall into large round values or into odd values. Bullion tends
60

towards odd values because it is valued by weight and fineness, so a piece of bullion would
rarely hit exactly a round guilder value. In contrast, official coins carried assigned values denominated in stuivers: 0.05 guilder increments and almost all in 0.1 increments (Menno S. Polak,
Historiografie en Economie van de “Muntchaos,” De Muntproductie van de Republiek 16061795, Deel I (1998), NEHA, Amsterdam, pp. 67-101). The standard bulk unit for coins was a
sack of 200, so round guilder values are common. Multiple sacks produce large values round to
100 guilders or even 1,000 guilders.
In practice, the difference looks like this. On July 20, 1688, Samuel Cohen made two deposits that were both credited to the same account (5077/113 f. 1491). With the receiver Arthur
Woodward, Cohen deposited 2,400 guilders that could easily have been 4 sacks of silver rijders
(a standard trade coin) at the ordinance value of 3 guilders per coin (5077/113 f. 1517). Through
the Specie Kamer, Cohen deposited 6,873.25 guilders (5077/113 f. 1484). That sum is difficult to
reach using standard coins if for no other reason than almost all Dutch coins were priced in even
stuivers (0.1 increments). More importantly, we think the bullion-coin divide explains why
Cohen made two deposits on the same day, for the pattern can be found on other days. For example, six days earlier, Cohen had deposited 11,073.075 guilders in the Specie Kamer and 3,675
guilders through a receiver (5077/131, ff. 1484, 1517).
Our interpretation has other support. In April and May 1668, the Specie Kamer debits
surged, and our theory suggests that this is a period of open market purchases. The AWB’s mint
orders survive for that year, and simultaneous with the purchases, the bank sent large quantities
of silver bullion (480,003 guilders worth) to the various mints from 27 April to 30 May
(5077/1313). Table A7 reports the guilder value sent to each mint.
Unfortunately for our purposes, the AWB did not separate metal outflows into different accounts, so we use odd values as a proxy for bullion. While not perfect, a sort by odd-value versus
round-value seems to reasonably mirror long-term behavior on the deposit side as seen in figure
5. Also, we know that the great run of June 1672 was not an open market operation. In that
month, round values withdrawals (our proxy for coin) totaled 2.5 million guilders while oddvalues withdrawals (our proxy for bullion) totaled 0.3 million guilders. The monthly flow of
these series is reported in Table A8.

III.

Fee Ratios
Having reconstructed withdrawals for our sample period, we calculated an average fee per

year by dividing fee revenue by total withdrawals. Table A9 reports the numbers in ratio of fee
revenue over metal outflows.
Fee revenue had to be constructed for the years 1666 to 1684, for the AWB reported total
revenue. We adjusted revenue for the AWB’s practice of counting interest due from the VOC as
revenue and subsequently not counting the actual interest payments. Next we removed interest
payments from the VOC (by Specie Kamer account) and from the Province of Holland (by
metal) to get a remainder to proxy “withdrawal fee” revenue. The proxy overstates actual withdrawal fee revenue, for it also includes other minor fees like overdraft charges. We do not report
revenue for the fiscal year 1673 because the bank replaced its regular revenue and expenses with
a single 67,247 write down caused by the re-pricing of Russian coins held by the bank (van Dillen 1925: 746). 1677, 1682 and 1684 lack complete withdrawal information because of missing
ledgers. The 1679 withdrawal numbers are low (fee ratio high) because we lack one Specie
Kamer folio for that year.
1683 is the only year during the receipt regime for which we have revenue and withdrawals. The ratio is 0.67 percent, but it is a poor proxy for withdrawal fees. Under the new regime,
one paid a receipt fee to rollover the option, so no metal need leave the bank. Also the bank began charging a transfer fee of 0.025 percent (van Dillen 1934: 84). We cannot separate these
different revenue sources, so we can only state that fee revenue dropped to a low rate in the year
receipts were adopted.

IV.

VOC
Table A10 considers the AWB as a creditor to the VOC in two ways: levels and flows.

Column 1 reports the amount the VOC owed to the AWB in bank guilders. We calculate this
amount using the bank’s records. The VOC records do not identify creditors. Column 2 reports
the level of the VOC’s total debt in current guilders. The total debt is comprised of obligations of
the company in general, obligations of each chamber, anticipations, bills of exchange, and miscellaneous creditors. Column 3 gives the AWB’s share of the total and assumes an agio of 4.5
percent.

While some years find the VOC owing 10 to 20 percent of its debt to the AWB, 15 out of
36 fiscal years closed with the company owing nothing to the bank. Levels suggest that in the
VOC relied on the AWB as a substantial multi-year lender in and near the 1680s. Otherwise, the
AWB was a long-term lender of little consequence.
To see the short-term credit story, we have reconstructed the amount the VOC borrowed
from the AWB during each fiscal year (column 4). We do not report repayment, for we already
know that often this debt was repaid within the year. Instead, we wonder how the VOC was using the AWB to facilitate operations during a fiscal year. Unfortunately, the VOC records do not
tell us intra-year borrowing, so we cannot calculate the AWB’s share of all short-term lending to
the VOC.
We do know, however, some general measures of VOC activity, so we instead see what
correlates with VOC borrowing from the AWB. Our approach is descriptive and seeks only the
gentlest of inferences regarding why the VOC borrowed from the AWB. As a dependent variable, we have the amount of VOC borrowing from the AWB per fiscal year in bank guilders. For
explanatory variables, we know the following in current guilders:
Two activities potentially creating demand for loans:
1. The total amount spent by the VOC in the Netherlands outfitting ships, paying interest, etc.
2. The amount of cash dividends paid out by the company to shareholders.
One activity potentially reducing the demand for loans
3. The total amount collected by the VOC from selling goods.
And a few VOC balance sheet items (levels) at the start of each fiscal year that might affect demand for AWB loans in the forthcoming year:
4. The trade good inventory
5. The cash and bank balances
6. Trade credits due to the VOC
7. The total external debt
We regressed AWB lending on these seven variables using OLS with no modifications, and
the result is in the paper as table 4. Expenditures strongly and positively correlate with borrowing. They suggest a derived demand for AWB loans of 25 percent of total expenditures. In con63

trast, Information about that year’s sales revenue lacks any explanatory power. These results
agree with the idea that the VOC was borrowing to outfit ships before the year’s fleet returned
from Asia.
Dividends appear of occasional consequence, and we cannot sort out why some dividends
correlate with AWB borrowing while others do not.
Of the four start-of-year levels, the three assets (substitutes to AWB loans) do have negative coefficients. While not statistically significant, the inventory and credit due levels suggest
notable effects. Starting cash appears of little import. Finally, the level of VOC debt at the start
of a fiscal year gives little information regarding AWB loans.
In total, we feel that comparing AWB loan amounts to yearly VOC expenditures (Column
5) gets at the heart of the AWB-VOC credit relationship. While that share (Column 6) did vary,
AWB loans became a routine, and often substantial, part of financing yearly ship outfitting.

Interpolation of the agio
The agio series was interpolated using a time series on the London price of a bill of ex-

change payable in Amsterdam (McCusker 1978, Table 2.8), quoted as bank schillings (i.e., 0.3
guilders) per pound sterling. The bill price series contains 179 monthly observations over the
sample period, including 77 months for which there is no corresponding agio observation. A
Kalman filter routine was used to fit a 3-month, bivariate VAR by maximum likelihood to all
available observations on the agio and on the bill price. Interpolated values of the agio are the
values returned by the Kalman smoother at the ML estimates.
The accuracy of this method was tested by simulations, in which a random selection of agio
observations (excluding the 1672 and 1693 outlier periods) were removed from the sample and
then estimated using the interpolation procedure described above. The standard error of the
smoothed estimates of the agio ranges from about 22 basis points over the holdout sample (with
a 5 percent probability of observations being allocated to holdout sample) to 35 basis points
(with a 50 percent probability). These are smaller than sample standard deviation of the agio
series (about 50 basis points; see Table 3), suggesting that the interpolation procedure is of value
in estimating missing values of the agio.
64

Table A1. AWB Balance Sheet, 1666 to 1703, in Bank Guilders1
End of
January

Total Balance

Metal Stock

VOC
Principal

VOC
Interest Due

Amsterdam
Principal

Holland2

Misc.3

Account
Balances

Capital

1666

10,057,240

7,454,756

300,000

1,925

2,072,898

224,662

8,411,238

1,646,002

1667

9,808,032

6,904,522

600,000

5,950

2,072,898

224,662

8,137,198

1,670,834

1668

7,916,122

4,700,428

900,000

2,072,898

224,662

9,823

6,202,978

1,713,144

1669

7,851,084

4,488,911

1,000,000

18,333

2,072,898

224,662

46,281

6,078,661

1,772,423

1670

7,166,504

4,841,334

2,072,898

224,662

27,610

5,367,018

1,799,486

1671

11,160,451

8,862,891

2,072,898

224,662

9,355,574

1,804,877

1672

9,056,487

6,654,277

100,000

2,072,898

224,662

4,649

7,210,433

1,846,054

1673

6,852,616

3,664,117

2,072,898

224,662

890,940

4,933,701

1,918,915

1674

8,366,142

5,976,295

2,072,898

226,830

90,119

6,514,474

1,851,668

8,311

1675

8,451,723

5,944,943

200,000

2,072,898

226,830

7,052

6,587,691

1,864,032

1676

7,071,6315

4,471,902

300,000

2,072,898

226,830

5,174,297

1,897,334

1677

7,862,941

4,747,706

800,000

15,507

2,072,898

226,830

5,924,194

1,938,747

1678

7,226,068

3,475,326

1,400,000

51,013

2,072,898

226,830

5,229,008

1,997,060

1679

7,545,572

3,632,511

1,600,000

13,333

2,072,898

226,830

5,488,900

2,056,672

1680

10,069,553

6,156,491

1,600,000

13,333

2,072,898

226,830

7,950,340

2,119,213

1681

10,444,657

7,136,595

1,000,000

8,333

2,072,898

226,830

8,277,109

2,167,548

1682

8,741,257

5,536,528

900,000

5,000

2,072,898

226,830

6,510,142

2,231,115

1683

10,567,596

7,595,133

400,000

3,333

2,342,299

226,830

8,295,978

2,271,618

1684

9,990,534

6,822,321

400,000

5,199

2,536,184

226,830

7,695,285

2,295,249

1685

9,300,020

6,096,968

2,976,222

226,830

6,959,229

2,340,791

1686

9,860,991

7,472,301

1,100,000

6,124

1,055,735

226,830

9,813,776

47,215

1687

10,237,827

7,913,428

1,300,000

29,604

767,965

226,830

10,175,964

61,863

1688

10,884,061

9,946,553

710,243

227,264

10,752,029

132,032

1689

12,864,189

11,831,444

805,481

227,264

12,714,692

149,497

1690

12,775,203

11,742,458

805,481

227,264

12,604,282

170,921

1691

13,569,830

12,708,006

634,560

227,264

13,557,117

12,713

1692

13,183,611

12,321,787

634,560

227,264

13,181,990

1,620

1693

13,559,192

12,602,130

729,798

227,264

13,524,659

34,533

1694

11,535,761

10,377,152

931,345

227,264

11,479,354

56,407

1695

12,108,018

10,405,194

400,000

1,075,560

227,264

12,013,638

94,380

1696

10,332,717

8,648,941

1,456,512

227,264

10,207,122

125,595

1697

10,412,947

9,110,123

1,075,560

227,264

10,263,048

149,899

1698

15,386,685

12,383,861

1,500,000

1,275,560

227,264

15,233,928

152,757

1699

16,919,060

13,716,236

600,000

2,375,560

227,264

16,750,540

168,520

1700

16,468,096

13,365,272

500,000

2,375,560

227,264

16,284,849

183,247

1701

15,040,586

12,037,762

800,000

1,975,560

227,264

14,830,152

210,434

1702

15,044,384

11,541,561

1,300,000

1,975,560

227,264

14,782,959

261,425

1703

12,908,349

10,005,525

700,000

1,975,560

227,264

12,578,043

330,306

Source is authors’ adjustment of van Dillen (1925, 741-762)
Notes for Table A1:
1. Holland’s debt is in current guilders.
2. The 1666 total comprises a loan of 132,000 at 4 percent, one year’s interest on that sum
(5,280), a loan of 84,836 at 4 percent, and 9 month’s interest on that sum (2,546). See
AMA 5077/1311, folio 4. In 1674, Holland’s debt was increased by 2,168 because of
missed interest payments in 1673 (AMA 5077/1315, folio 4). An additional 434 in interest is considered due from Holland starting in 1688 (5077/1322, folio 16).
3. Miscellaneous includes negative balances of assayers, mint masters, an emergency loan
in 1672, and other unspecified claims. All miscellaneous lending ends in 1676.
4. Miscellaneous includes negative balances of assayers, mint masters, an emergency loan
in 1672, and other unspecified claims. All miscellaneous lending ends in 1676.
5. The 1676 metal stock and capital have been reduced by 30,000 each per a write-down not
booked until 1677 (van Dillen 1925: 747-8; AMA 5077/1315, folios 1-2).

Table A3. AWB Ledgers and Folios
By Half-Year Periods: a=February to July, b=August to January
Date
Ledger
Folios: Specie Kamer in Bold, Receiver Folios in Regular (kept in sequence by receiver)
1666a

5077/62

147

1174

1391

149

151

1666b

5077/63

1054

1233

1050

1052

1260

1667a

5077/64

982

1149

1249

1387

984

986

988

1667b

5077/65

982

1088

1144

1263

984

986

988

1668a

5077/66

1006
1012

1082

1179

1238

1252

1276

1397

1668b

5077/67

1010

1154

1474

1012

1018

1020

1669a

5077/68

1010

1203

1479

1012

1014

1016

1669b

5077/69

1010

1314

1012

1014

1330

1016

1353

1670a

5077/70

1008

1177

1220

1010

1328

1012

1670b

5077/71

1008
1172

1060
1416

1114

1262

1010

1671a

5077/72

90
1038

1273
1207

1375

1450

1671b

5077/73

1028

1142

1501

1672a

5077/74

990
1496

1415
1501

1672b

5077/75

1044

1673a

Missing

1673b

5077/76

1674a

1528

1008

1010

1129

1240

1014

1347

1250

1420

1012

1348

1014

1494

1034

1077

1140

1036

1120

1030

1032

1034

1433
1076

1439
1078

1449
1080

1455

1461

1465

1478

1488

1047

1046

1220

1048

1050

1020
722

1082
1062

1158
1116

1022

1024

1026

1032

1062

258

298

5077/77

878

1209

1303

880

882

884

1674b

5077/78

910

1114

1341

1446

912

914

1675a

5077/79

952

1282

1467

954

956

958

1675b

5077/80

974

1217

976

978

980

916

1676a

5077/81

1016

1018

1020

1022

1676b

5077/82

1042

1044

1046

1048

1677a

Missing

1677b

5077/83

1044

1494

1046

1048

1050

1678a

5077/84

1078

1452

1080

1082

1084

1678b

5077/85

1058

1060

1062

1064

1679a

5077/86

1021

1022

1023

1024

1679b

5077/87

1008

1332

1421

1009

1010

1011

1680a

5077/88

978

1024

1382

979

980

981

1680b

5077/89

1006

979

980

981

1681a

5077/90

982

979

980

981

1681b

5077/91

982

979

980

981

1682a

5077/92

981

979

1390

980

1396

949

1682b

Missing

1683a

5077/94

990

1406

1564

988

1505

989

1052

1296

1351

1514

1683b

5077/96

990

1292

1337

1422

1519

988

994

989

1286

1463

1684a

5077/98

990
1567

1277
989

1317
1407

1360
1512

1383
1573

1411

1484

1585

988

1518

1684b

Missing

1685a

5077/101

990
1453

1274
989

1300
1334

1344
1427

1402
1484

1450

1500

1533

988

1330

1685b

5077/103

990
1296
1508

1299
1317
1531

1335
1459

1344
1503

1349
1532

1365
989

1378
1300

1399
1321

1462
1411

988
1470

1686a

5077/105

990
1492

1280
989

1300
1313

1334
1408

1390
1471

1451
1494

1491

988

1275

1462

1686b

5077/107

990
1392

1283
989

1319
1284

1378
1310

1437
1335

1476
1358

988
1369

1303
1402

1339
1470

1366
1492

1687a

5077/109

990
1413
1477

1297
1465
1497

1354
1491

1431
989

1496
1283

988
1303

1291
1329

1322
1380

1353
1407

1376
1445

1687b

5077/111

990
1315
1395

1312
1347
1413

1377
1383

1462
1412

1482
989

1498
1289

1515
1301

1527
1321

988
1345

1290
1371

1688a

5077/113

990
1511

1299
989

1326
1379

1380
1432

1429
1464

1484
1489

1537
1517

988
1534

1378

1450

1688b

5077/115

990
1393
1495

1314
1420

1351
989

1403
1306

1455
1338

1487
1366

1514
1388

1540
1405

988
1416

1354
1443

1689a

5077/117

1171
1503

1423
1564

1450
1624

1461

1493

1552

1596

1181

1176

1427

1689b

5077/119

1171
1421

1429
1439

1476
1471

1533
1519

1581
1532

1616

1640

1676

1181

1176

1690a

5077/121

1171
1176

1419
1643

1440

1463

1502

1542

1591

1624

1664

1181

1690b

5077/123

1171
1176

1421
1454

1439
1527

1463
1562

1499
1581

1540
1181

1575
1259

1609
1555

1651
1586

1695

1691a

5077/124

1171
1715

1427
1176

1440
1632

1464
1692

1485
1181

1511
1603

1549

1573

1622

1675

1691b

5077/126

1171
1466

1448
1547

1478
1676

1521
1181

1574
1487

1620
1563

1668
1657

1709

1739

1176

1692a

5077/128

1171
1176

1461
1581

1490
1181

1512
1492

1547
1632

1583
1719

1623

1667

1698

1728

1692b

5077/130

1171
1488

1467
1635

1498
1683

1545
1758

1586
1181

1631
1569

1675
1622

1734
1674

1766
1785

1176

1693a

5077/132

1171
1675
1756

1486
1705

1504
1728

1532
1772

1559
1793

1585
1176

1619
1616

1639
1750

1654
1181

1673
1609

1693b

5077/134

1171
1655

1444
1181

1465
1562

1501
1637

1527

1576

1640

1686

1176

1554

1694a

5077/136

1171
1176

1443
1689

1464
1181

1505
1705

1540

1585

1628

1687

1732

1776

1694b

5077/138

1171

1447

1481

1530

1601

1653

1721

1176

1181

1182

1695a

5077/140

1171
1181

1451

1475

1517

1564

1610

1679

1760

1799

1176

1695b

5077/142

1171
1612

1454
1181

1487

1535

1599

1673

1747

1797

1176

1562

1696a

5077/143

1171
1515

1465
1598

1501
1745

1548
1181

1607
1533

1662
1695

1720

1765

1813

1176

1696b

5077/145

1171
1181

1478
1588

1512
1699

1581

1645

1730

1829

1176

1720

1833

1697a

5077/146

1171
1674

1481
1725

1536
1784

1589
1181

1645
1469

1704
1573

1764
1650

1176
1744

1482

1590

1697b

Missing

1698a

5077/148

1171
1594

1405
1735

1523

1593

1688

1768

1176

1664

1784

1181

1698b

5077/150

1171
1761

1476
1860

1556
1181

1676
1487

1815
1577

1176
1693

1505
1770

1560
1902

1619

1666

1699a

5077/152

1171
1595

1504
1674

1533
1785

1596
1849

1663
1181

1744
1541

1802
1645

1842
1812

1176

1516

1699b

5077/154

1171
1655

1484
1730

1537
1843

1595
1181

1689
1478

1807
1502

1176
1576

1513
1704

1588
1741

1624
1824

1700a

5077/156

1271
1684

1612
1726

1657
1871

1707
1914

1779
1281

1885
1590

1961
1637

1276
1739

1601
1917

1646
1962

1700b

Missing

1701a

5077/158

1271
1799
1810

1659
1895
1872

1734
1967
1946

1829
2020
2003

1939
1281

2002
1607

1276
1622

1597
1643

1700
1665

1743
1719

1701b

5077/160

1271
1624

1629
1712

1670
1801

1737
1932

1805
1281

1878
1639

2011
1733

1276
1859

1601
1960

1609

1702a

5077/162

1271
1928

1627
1281

1691
1630

1779
1685

1848
1765

1935
1847

1276
1983

1647

1704

1825

1702b

5077/164

1371

1732

1785

1866

1934

2003

1376

1916

1381

Table A4. Deduced VOC Loans
Loans

Repayments
Amount

Internal Rate
of Return

10-Sep-71

201,446.20

4.06%

→

9-Sep-71

402,410.38

4.07%

300,000

→

11-Sep-71

301,643.75

4.08%

4-Aug-71

200,000

→

610576

200,861.50

4.03%

9-Jan-72

100,000

8-Feb-72

100,000

→

9-Mar-72

200,800.00

3.24%

13-Nov-74

100,000

→

4-Dec-74

200,942.45

4.10%

13-Nov-74

300,000

→

2-Apr-75

203,777.70

5.79%1

10-Jan-75

300,000

→

11-Jan-75

300,000.00

9-Jul-75

150,000

13-Aug-75

200,000

28-Aug-75

200,000

7-Sep-75

100,000

→

19-Oct-75

654,710.90

3.97%

18-Sep-75

100,000

3-Oct-75

100,000

4-Oct-75

100,000

9-Oct-75

100,000

→

24-Oct-75

401,022.30

4.06%

31-Jan-83

403,3332

→

4/2/83

101,533.33

4.19%

4/2/83

203,066.65

4.19%

4/2/83

101,533.33

4.19%

Date

Amount

Date

7-Jul-71

200,000

→

17-Jul-71

400,000

24-Jul-71

4/16/83

200,000

→

11/25/83

204,644.45

3.80%

5/13/83

100,000

→

11/25/83

102,088.80

3.89%

6/18/83

100,000

→

11/25/83

101,744.35

3.98%

7/14/83

50,000

→

11/25/83

50,727.73

3.96%

7/20/83

50,000

→

11/25/83

50,677.78

3.87%

8/23/83

50,000

→

11/25/83

50,511.10

3.97%

8/31/83

100,000

→

11/25/83

100,944.48

4.01%

10/26/83

100,000

→

12/3/83

100,400.00

3.84%

11/1/83

100,000

11/9/83

50,000

11/12/83

100,000

11/15/83

100,000

→

12/1/83

350,816.65

3.92%

9/13/83

100,000

10/5/83

100,000

10/12/83

100,000

10/14/83

100,000

→

1/31/843

405,199.00

3.97%

Source: Authors’ analysis.
Notes
1. De Korte (1984: 66) suggests that the VOC offered 6 percent on anticipations in 1674.
2. Uses the bank’s record of debt due at the start of fiscal year 1683.
3. Used the bank’s record of debt due at the end of fiscal year 1684.

Table A5. Municipal Capital Extractions and Injections

Municipal Capital Extractions
Date

Bank Guilders

Current Guilder

Agio Used

Account

20,000.00

20,850.00

4 1/4

14-Jan-83

Metal

249,400.50

260,000.00

4 1/4

10-Feb-83

Metal

143,885.00

150,000.00

4 1/41

26-Jan-84

Metal

50,000.00

52,125.00

4 1/41

1-Mar-84

Metal

50,000.00

52,062.50

4 1/81

2-May-84

Metal

96,154.00

100,000.00

26-Oct-84

Metal

150,000.00

156,187.50

4 1/81

11-Jan-85

Metal

143,885.00

150,000.00

4 1/41

14-Feb-85

Metal

120,863.30

126,000.00

4 1/4

13-Jul-85

Metal

47,961.65

50,000.00

4 1/4

28-Jul-85

Metal

47,961.65

50,000.00

4 1/4

28-Aug-85

Metal

95,923.30

100,000.00

4 1/4

15-Nov-85

Metal

47,961.65

50,000.00

4 1/4

7-Dec-85

Metal

59,632.60

62,167.00

4 1/4

19-Feb-87

Metal

57,142.85

60,000.00

7-Apr-88

Metal

95,238.10

100,000.00

5/30/82

Type

23-Jan-93

Metal

95,238.10

100,000.00

4-Jun-93

Metal

142,500.00

150,000.00

5 5/192

30-Oct-93

Metal

59,047.60

62,000.00

25-Feb-94

Metal

48,976.00

51,458.00

20-Jul-94

Metal

95,238.00

100,000.00

17-Feb-95

Metal

95,238.00

100,000.00

8-Nov-95

Metal

95,238.00

100,000.00

11-Jan-96

Metal

190,476.00

200,000.00

18-Dec-97

Account

100,000.00

14-Jan-98

Account

100,000.00

28-Oct-98

Account

100,000.00

6-Nov-98

Account

200,000.00

8-Dec-98

Account

200,000.00

25-Nov-98

Account

300,000.00

23-Dec-98

Account

300,000.00

3-Mar-99

Account

100,000.00

18-Mar-99

Account

100,000.00

18-Mar-02

Metal

95,522.40

100,000.00

4 11/16

Table A5 Continued
Municipal Capital Injections
Date

Type

Bank Guilder

Current Guilder

Agio

12-Jun-86

Metal

191,847.00

200,000.00

4 1/4

19-Jul-86

Metal

95,923.00

100,000.00

4 1/4

23-Mar-87

Metal

57,142.85

60,000.00

26-Aug-87

Metal

28,571.45

30,000.00

4-Sep-87

Metal

28,571.45

30,000.00

18-Apr-96

Metal

190,476.00

200,000.00

105,000.00

Metal

190,476.00

28-Mar-99

1-Sep-96

Account

200,000.00

6-Mar-99

Metal

100,000.00

8-Apr-00

Account

400,000.00

Sources: AMA 5077/1311 through 1323.
Notes:
1. Imputed from bank guilders (5077/1321 f 7) and current guilders (5077/1322 loose insert).

2. Coins removed in sacks worth 600 current booked at 570 bank: likely driegulden.

Table A6. Large Value and Odd Value Deposits 1666 to 1703
Specie Kamer

Receiver

Direct Debits

Debits

Total Deposit Transactions

3,686

17,771

Share of Deposits with guilder values that are
Large Values: Round 100's

6.1%

48.5%

With a Partial Guilder

81.6%

7.4%

With Partial Stuiver
(1/20th of a guilder)

10.3%

0.5%

Share of Deposits with guilder values that are
Odd Values:

Source: Authors’ calculation.
Notes
1. Excludes loan transactions, receiver transfers, and expenditures.

Table A7. AWB Mint Operations, April and May 1668
Guilder Value of Silver Bullion Sent to Various Mint
Mint
Gelderland
Holland
West-Friesland
Utrecht
Friesland
Overijssel
Deventer
Kampen
Zwolle City

27-Apr
22,471.70
30,284.85
23,091.80

Total

99,965.20

Grand Total

480,003.67

1-May

8-May
28,986.25
30,105.00
29,123.60

25,394.55

14-May

30-May
27,030.40
27,837.75

27,890.45

26,278.85
27,419.17

23,877.80
26,306.85
24,396.55
24,116.85

27,586.30
99,975.75

115,801.15

Source: AMA 5077/1313

27,804.95
27,890.45

136,371.12

Table A8. Monthly Flows: 1666 to 1703 in Bank Guilders
Guilder Creation by Metal Inflows

Guilder Destruction by Metal Outflows

“Coin Deposits”
Receivers

“Bullion Purchases”
Specie Camer

“Coin Withdrawals”
Round Values

“Bullion Sales”
Odd Values

Feb-66

42,281.95

0.00

12,060.00

17,726.88

Mar-66

17,631.75

0.00

421,942.00

15,030.28

Apr-66

55,413.20

346,000.00

227,226.00

105,405.70

May-66

92,164.03

127,501.60

49,448.00

125,898.75

Jun-66

66,628.95

30,000.00

833.00

7,413.03

Jul-66

134,581.98

100,000.00

199,040.00

66,083.47

Aug-66

269,442.73

1,223.75

45,690.00

19,349.83

Sep-66

181,391.53

0.00

85,368.00

15,278.05

Oct-66

6,063.40

0.00

93,501.00

13,460.00

Nov-66

11,344.80

0.00

19,497.00

12,904.00

Dec-66

1,723.10

0.00

97,174.00

105,545.35

Jan-67

0.00

84,506.00

209,289.35

Feb-67

5,666.95

12,000.00

2,516.00

31,667.90

Mar-67

3,911.75

19,223.10

21,928.00

119,202.98

Apr-67

43,451.53

9,863.75

108,923.00

156,628.80

May-67

20,656.10

17,898.10

146,668.00

57,984.18

Jun-67

9,303.00

13,238.55

22,705.00

44,185.53

Jul-67

9,870.30

30,300.38

32,217.00

72,909.75

Aug-67

1,000.00

12,000.00

79,980.00

27,386.80

Sep-67

12,679.50

42,073.90

189,302.00

107,987.45

Oct-67

2,060.50

0.00

275,652.00

74,613.98

Nov-67

14,537.35

12,000.00

183,364.00

340,681.90

Dec-67

1,074.50

12,000.00

366,740.00

13,159.95

Jan-68

5,775.70

0.00

47,486.00

36,121.00

Feb-68

35,867.35

0.00

188,989.00

76,232.75

Mar-68

8,260.00

6,000.00

303,322.00

77,171.25

Apr-68

10,744.00

330,701.80

299,259.00

139,993.30

May-68

7,128.40

1,437,506.25

300,638.00

147,324.68

Jun-68

5,548.90

82,176.18

68,993.00

90,181.73

Jul-68

19,091.50

61,236.20

93,215.00

99,446.75

Aug-68

23,396.00

34,166.17

22,006.00

30,366.63

Sep-68

12,941.50

5,810.63

13,241.00

38,153.17

Oct-68

7,259.80

44,632.75

56,306.00

45,533.77

Nov-68

13,627.60

44,419.25

183,430.00

31,601.70

Dec-68

14,407.15

0.00

52,315.00

12,496.25

Jan-69

11,376.50

2,391.80

42,000.00

18,943.45

Feb-69

39,286.20

0.00

2,030.00

14,882.90

Mar-69

28,162.10

6,000.00

3,772.00

19,579.40

Apr-69

5,600.00

6,000.00

17,290.00

76,818.15

May-69

14,670.00

18,000.00

8,829.00

23,639.25

Jun-69

305.50

20,610.70

14,123.00

8,238.33

Jul-69

39,348.20

15,564.70

27,376.00

21,568.05

Aug-69

67,135.30

18,000.00

5,887.00

9,013.05

Sep-69

53,504.00

73,726.60

5,889.00

7,547.40

Oct-69

36,889.35

0.00

65,291.00

15,060.60

Nov-69

100,741.45

2,387.50

27,079.00

137,058.65

Dec-69

294,380.30

3,888.15

50,335.00

23,614.15

Jan-70

17,923.85

76,000.00

24,009.00

1,659.00

Feb-70

108,314.75

25,748.05

840.00

5,013.75

Mar-70

79,802.30

45,520.48

5,179.00

12,531.00

Apr-70

279,390.38

101,164.38

40,689.00

17,844.63

May-70

200,993.00

483,741.45

125,735.00

10,910.50

Jun-70

125,639.55

148,622.20

11,004.00

16,772.88

Jul-70

121,593.10

0.00

4,432.00

7,919.05

Aug-70

139,628.25

815,231.20

8,283.00

3,355.50

Sep-70

137,260.03

1,415,986.48

257,001.00

573,082.22

Oct-70

91,050.75

229,519.45

75,786.00

26,545.10

Nov-70

74,448.15

131,008.00

91,176.00

21,786.48

Dec-70

121,171.35

139,721.88

148,987.00

30,581.00

Jan-71

243,924.75

128,101.30

52,038.00

7,705.35

Feb-71

277,492.55

59,626.55

2,505.00

7,560.00

Mar-71

293,073.40

2,981.40

18,665.00

844.50

Apr-71

114,742.98

0.00

129,335.00

62,673.20

May-71

274.00

842.70

90,409.00

70,272.75

Jun-71

28,717.65

5,000.00

428,959.00

183,927.55

Jul-71

0.00

644,761.00

54,174.80

Aug-71

6,006.30

751.25

301,470.00

9,447.50

Sep-71

32,144.80

1,194.25

436,628.00

211,452.98

Oct-71

0.00

521,353.00

8,430.00

Nov-71

2,100.00

11,378.60

165,363.00

52,643.20

Dec-71

3,005.00

31,694.72

22,267.00

10,776.00

Jan-72

6,608.35

94,975.90

7,526.00

3,357.75

Feb-72

28,985.90

0.00

31,200.00

7,587.00

Mar-72

8,840.00

362.40

2,752.00

43,275.45

Apr-72

17,807.80

1,977.42

4,243.00

7,554.00

May-72

61,561.40

492,991.48

840.00

16,087.50

Jun-72

88,319.22

2,205.00

2,478,372.00

291,351.73

Jul-72

184,624.65

124,543.08

497,630.00

28,198.90

Aug-72

36,767.85

900.00

44,475.00

1,160.65

Sep-72

60,398.10

32,908.30

68,234.00

20,114.50

Oct-72

15,109.70

141,521.70

3,807.00

10,978.90

Nov-72

33,357.90

0.00

17,870.00

6,684.00

Dec-72

19,019.50

2,422.05

3,844.00

5,995.50

Jan-73

931.40

81,112.15

13,683.00

11,762.25

Aug-73

19,496.50

46,196.25

0.00

7,985.15

Sep-73

161,096.95

222,601.32

1,695.00

0.00

Feb-73
Mar-73
Apr-73
May-73
Jun-73
Jul-73

Oct-73

198,788.75

272,967.28

0.00

Nov-73

95,726.95

129,162.38

0.00

Dec-73

17,608.30

132,844.53

2,460.00

6,897.50

Jan-74

3,007.00

148,456.25

6,771.00

16,868.25

Feb-74

37,689.65

6,380.60

2,231.00

5,937.00

Mar-74

825.30

33,477.60

3,432.00

5,955.00

Apr-74

3,468.70

10,773.95

29,706.00

7,582.38

May-74

1,747.30

31,773.50

175,013.00

31,501.25

Jun-74

1,887.90

84,048.65

138,407.00

25,434.00

Jul-74

0.00

207,612.90

172,931.00

41,257.75

Aug-74

317.30

129,572.48

145,276.00

16,933.65

Sep-74

771.00

31,718.85

15,516.00

34,929.90

Oct-74

10,405.40

18,945.45

61,159.00

42,939.90

Nov-74

1,679.10

69,453.35

76,100.00

9,014.25

Dec-74

6,074.00

17,025.95

110,571.00

10,293.02

Jan-75

0.00

362,830.25

1,698.00

25,602.00

Feb-75

4,338.97

118,484.35

33,487.00

1,707.00

Mar-75

3,019.90

0.00

31,296.00

5,150.68

Apr-75

6,141.00

0.00

75,102.00

170,103.80

May-75

2,495.80

0.00

113,865.00

50,837.07

Jun-75

6,560.60

2,562.50

138,637.00

15,207.50

Jul-75

11,515.90

0.00

161,774.00

0.00

Aug-75

21,882.47

843.75

105,108.00

17,551.13

Sep-75

916.65

0.00

9,366.00

40,367.90

Oct-75

1,250.65

0.00

13,450.00

12,515.82

Nov-75

0.00

177,964.00

308,633.05

Dec-75

0.00

15,948.00

132,890.10

Jan-76

8,709.50

24,333.00

25,803.00

39,794.70

Feb-76

13,307.90

0.00

8,319.00

13,891.25

Mar-76

8,828.30

0.00

22,619.00

54,737.50

Apr-76

500.00

0.00

241,665.50

May-76

8,822.15

0.00

9,200.00

20,477.50

Jun-76

5,700.00

41,425.00

0.00

Jul-76

16,915.55

273,883.57

0.00

27,346.90

Aug-76

1,581.80

346,481.10

3,090.00

1,694.00

Sep-76

400.00

25,493.60

0.00

Oct-76

3,604.20

0.00

Nov-76

346.30

4,214.75

50,650.00

878.75

Dec-76

363.60

2,831.80

1,745.00

6,455.95

Jan-77

370.30

25,687.50

10,616.00

9,439.45

7,111.65

15,978.30

85,820.00

98,266.40

Feb-77
Mar-77
Apr-77
May-77
Jun-77
Jul-77
Aug-77
Sep-77

450.60

0.00

130,784.00

69,522.85

Oct-77

307.90

0.00

27,103.00

132,552.20

Nov-77

58,044.50

0.00

436,334.00

409,548.10

Dec-77

14,375.70

0.00

78,314.00

1,747.20

Jan-78

16,434.10

0.00

73,820.00

66,953.15

Feb-78

23,952.00

0.00

7,500.00

5,240.15

Mar-78

800.00

4,460.00

9,000.00

4,280.70

Apr-78

600.00

10,022.60

0.00

4,267.90

May-78

2,283.30

18,674.65

6,000.00

2,556.85

Jun-78

1,211.00

177,557.65

0.00

3,352.85

Jul-78

6,140.25

189,009.85

854.00

1,725.40

Aug-78

9,015.25

30,399.75

0.00

Sep-78

0.00

18,022.60

27,224.00

5,701.10

Oct-78

0.00

44,495.95

0.00

2,400.20

Nov-78

844.70

10,475.00

189,570.00

123,344.75

Dec-78

0.00

8,653.05

Jan-79

644.40

35,159.45

10,800.00

5,119.20

Feb-79

6,569.05

3,086.00

0.00

9.23

Mar-79

2,417.00

0.00

2,606.00

4,324.20

Apr-79

477.33

71,640.10

19,078.00

12,148.80

May-79

1,248.40

11,683.20

0.00

Jun-79

0.00

5,950.10

22,263.00

857.50

Jul-79

812.00

0.00

5,171.10

Aug-79

34,193.30

22,672.60

0.00

Sep-79

410.00

8,893.22

0.00

Oct-79

12,791.68

0.00

2,937.27

Nov-79

19,560.25

170,200.80

0.00

206.25

Dec-79

3,718.40

994,726.08

22,200.00

0.00

Jan-80

3,774.95

398,093.43

850.00

0.00

Feb-80

9,068.75

807,539.45

0.00

2,602.95

Mar-80

1,614.90

351,608.68

0.00

1,749.20

Apr-80

523.00

91,019.88

0.00

1,890.05

May-80

0.00

23,384.40

16,098.00

0.00

Jun-80

450.00

36,513.50

881.00

884.80

Jul-80

879.15

11,485.30

847.00

850.75

Aug-80

1,000.00

1,105.00

0.00

2,603.00

Sep-80

410.00

9,012.50

869.00

1,716.70

Oct-80

310.50

6,065.60

847.00

0.00

Nov-80

0.00

5,295.60

24,612.00

153,029.20

Dec-80

0.00

100,000.00

64,326.35

Jan-81

0.00

600.00

0.00

Feb-81

800.00

0.00

2,634.10

Mar-81

606.80

0.00

5,215.10

Apr-81

600.00

9,977.87

631,315.00

128,315.70

May-81

2,200.00

22,518.85

24,000.00

29,296.75

Jun-81

636.50

0.00

89,417.30

Jul-81

3,897.50

0.00

30,613.40

Aug-81

624.00

0.00

97,125.00

60,810.30

Sep-81

0.00

109,590.00

59,799.40

Oct-81

1,200.00

11,834.90

0.00

6,712.85

Nov-81

16,786.40

0.00

2,500.00

501,789.50

Dec-81

8,865.20

0.00

4,075.00

55,193.45

Jan-82

18,000.00

173,820.97

1,845.00

2,649.20

Feb-82

7,482.95

85,315.42

878.00

4,470.15

Mar-82

5,160.90

0.00

4,700.00

56,944.05

Apr-82

500.00

0.00

209,253.00

26,773.07

May-82

460,656.23

0.00

95,763.00

78,272.02

Jun-82

659,556.27

42,480.80

0.00

6,225.40

Jul-82

212,945.23

0.00

3,428.00

2,660.45

Feb-83

184,182.38

0.00

1,670.00

6,924.25

Mar-83

357,589.70

1,847.40

36,605.00

4,954.35

Aug-82
Sep-82
Oct-82
Nov-82
Dec-82
Jan-83

Apr-83

154,233.10

0.00

317,860.00

12,986.15

May-83

74,066.40

0.00

69,052.00

11,704.85

Jun-83

91,458.70

0.00

34,333.00

5,618.40

Jul-83

92,490.00

1,704.45

79,414.00

11,119.73

Aug-83

188,894.50

0.00

64,566.00

10,050.55

Sep-83

167,101.78

0.00

123,477.00

9,767.60

Oct-83

4,530.00

1,963.03

345,429.00

101,454.70

Nov-83

122,451.93

0.00

214,866.00

81,728.70

Dec-83

37,709.50

5,993.95

161,552.00

55,987.65

Jan-84

10,485.00

0.00

275,112.00

32,708.85

Feb-84

13,683.00

0.00

73,097.00

7,153.65

Mar-84

17,589.00

22,115.40

161,097.00

23,129.30

Apr-84

9,784.93

361,688.92

114,982.00

204,887.35

May-84

132,032.70

243,664.63

92,181.00

143,689.98

Jun-84

188,574.00

20,656.35

87,063.00

61,044.70

Jul-84

302,832.00

61,072.75

83,044.00

68,196.88

59,613.20

0.00

177,525.00

23,789.30

Aug-84
Sep-84
Oct-84
Nov-84
Dec-84
Jan-85
Feb-85
Mar-85

90,448.13

0.00

335,682.00

98,249.03

Apr-85

194,290.50

461.30

235,364.00

131,520.00

May-85

135,725.00

868.65

305,484.00

44,659.85

Jun-85

177,386.00

0.00

171,196.00

40,915.00

Jul-85

87,948.00

3,322.80

107,650.00

30,471.15

Aug-85

71,098.20

198.10

50,425.00

26,277.05

Sep-85

685,587.40

0.00

6,705.00

15,981.60

Oct-85

173,985.00

1,909,653.70

348,795.00

159,926.65

Nov-85

255,815.05

121,388.35

253,706.00

74,069.80

Dec-85

405,705.50

1,667.00

176,448.00

99,035.90

Jan-86

433,556.65

615.35

67,996.00

20,322.80

Feb-86

197,181.55

736.55

238,669.00

29,934.45

Mar-86

46,080.00

0.00

331,510.00

36,147.43

Apr-86

146,397.00

0.00

77,953.00

34,860.15

May-86

49,549.60

485.50

381,787.00

42,081.25

Jun-86

217,282.80

0.00

55,361.00

31,877.95

Jul-86

274,323.80

164.85

31,433.00

60,160.60

Aug-86

149,666.60

254.10

64,948.00

28,885.25

Sep-86

253,821.90

1,355.95

41,825.00

30,535.50

Oct-86

678,557.90

5,005.50

195,766.00

35,305.20

Nov-86

393,131.00

959.70

224,175.00

84,708.95

Dec-86

119,610.45

18,799.40

362,834.00

612,842.00

Jan-87

590,355.55

167,380.98

28,721.00

29,758.35

Feb-87

342,139.00

3,699.00

33,650.00

33,103.50

Mar-87

421,221.85

5,469.10

1,750.00

38,143.80

Apr-87

464,544.20

21,793.10

3,627.00

42,363.20

May-87

326,724.00

3,694.90

26,803.00

34,675.40

Jun-87

375,232.50

45,386.58

11,283.00

32,011.98

Jul-87

248,930.35

871.20

7,872.00

30,469.48

Aug-87

315,502.50

104,129.25

9,762.00

32,765.25

Sep-87

513,033.00

196,871.55

17,805.00

27,504.10

Oct-87

888,687.70

51,826.15

247,620.00

75,146.45

Nov-87

194,124.60

2,338.00

556,685.00

36,169.25

Dec-87

15,783.00

114,714.03

959,013.00

57,639.93

Jan-88

1,125.00

23,868.02

345,366.00

58,116.10

Feb-88

4,950.00

84,316.90

58,608.00

39,685.00

Mar-88

51,508.50

54,698.22

34,030.00

59,278.55

Apr-88

214,215.10

164,898.08

3,614.00

47,514.00

May-88

251,861.50

41,396.27

125,116.00

51,934.75

Jun-88

444,427.85

109,463.20

3,630.00

42,275.55

Jul-88

478,896.20

100,710.63

30,030.00

37,151.75

Aug-88

285,388.65

3,419.95

48,291.00

51,037.20

Sep-88

289,154.50

114,435.07

78,015.00

32,292.85

Oct-88

846,116.55

35,591.55

36,362.00

38,199.15

Nov-88

487,246.80

143,593.58

539,663.00

38,718.90

Dec-88

133,548.00

264,442.55

740,048.00

33,777.02

Jan-89

13,173.00

42,915.50

485,865.00

29,264.40

Feb-89

122,770.50

49,079.23

39,593.00

36,919.00

Mar-89

169,889.40

49,327.67

143,946.00

56,456.40

Apr-89

16,086.00

24,812.35

598,185.00

135,268.12

May-89

75,954.00

119,297.22

14,085.00

34,649.35

Jun-89

147,739.20

108,929.80

81,399.00

61,867.97

Jul-89

190,473.50

22,660.05

4,486.00

64,139.25

Aug-89

297,603.60

63,848.57

10,608.00

47,095.10

Sep-89

221,104.50

81,086.97

1,206.00

34,513.60

Oct-89

180,741.30

105,669.60

2,650.00

39,152.00

Nov-89

187,760.60

166,762.30

371,373.00

207,432.35

Dec-89

20,400.00

95,522.40

398,868.00

39,476.30

Jan-90

0.00

19,615.45

160,795.00

50,338.92

Feb-90

0.00

78,751.20

66,809.00

54,667.95

Mar-90

0.00

25,945.40

1,650.00

72,894.15

Apr-90

4,740.00

97,700.15

8,495.00

64,903.55

May-90

43,716.00

247,207.68

3,563.00

77,838.10

Jun-90

261,723.00

3,311.60

9,319.00

76,428.95

Jul-90

116,354.30

637.88

890.00

44,439.20

Aug-90

267,780.00

25,868.25

6,299.00

89,145.30

Sep-90

138,244.70

189,287.20

1,812.00

65,507.00

Oct-90

332,921.10

160,733.87

18,208.00

78,588.60

Nov-90

559,305.15

236,744.33

41,058.00

61,481.35

Dec-90

93,817.50

349.40

927,224.00

65,420.55

Jan-91

5,616.00

52,688.00

88,902.00

49,506.38

Feb-91

7,494.00

1,585.85

273,832.00

109,971.53

Mar-91

47,700.00

2,397.95

96,739.00

135,059.03

Apr-91

13,270.50

1,614.45

255,776.00

164,138.85

May-91

95,480.00

2,517.80

128,288.00

450,312.75

Jun-91

453,760.00

348,902.88

2,747.00

55,687.50

Jul-91

94,815.00

98,993.85

63,330.00

55,924.47

Aug-91

634,382.20

306,059.88

38,982.00

71,940.85

Sep-91

204,453.00

1,636.45

9,211.00

61,379.47

Oct-91

177,498.60

2,091.30

6,893.00

60,090.80

Nov-91

190,813.80

2,077.75

489,169.00

185,428.65

Dec-91

133,944.50

617.35

384,140.00

44,415.00

Jan-92

120,310.40

827.70

93,425.00

69,134.80

Feb-92

128,121.00

489.05

73,169.00

46,457.10

Mar-92

128,306.50

750.05

271,149.00

89,860.68

Apr-92

273,315.00

240,584.25

139,418.00

164,992.70

May-92

313,365.00

238,189.73

131,074.00

178,449.40

Jun-92

161,854.00

844.82

438,318.00

97,404.35

Jul-92

148,197.70

0.00

234,942.00

166,335.60

Aug-92

143,322.00

145,356.60

145,979.00

67,395.80

Sep-92

191,897.00

900.05

90,915.00

71,355.15

Oct-92

278,040.90

232.20

19,674.00

68,656.35

Nov-92

680,177.63

11,863.05

48,455.00

71,187.90

Dec-92

270,530.15

380.40

168,328.00

230,200.75

Jan-93

273,875.30

1,618.40

204,517.00

71,746.92

Feb-93

189,815.65

1,645.60

274,921.00

115,916.35

Mar-93

71,071.50

1,036.00

300,014.00

92,286.90

Apr-93

73,757.85

848.50

377,685.00

72,471.75

May-93

285,020.40

374,528.10

858,679.00

173,674.33

Jun-93

188,712.77

3,447.85

422,798.00

100,566.10

Jul-93

84,470.60

1,806.65

224,124.00

62,751.00

Aug-93

220,997.20

10,110.15

129,343.00

53,373.00

Sep-93

40,623.00

1,331.00

86,628.00

54,585.65

Oct-93

96,540.00

1,752.25

133,843.00

61,629.75

Nov-93

289,878.00

2,885.75

76,779.00

47,728.85

Dec-93

257,745.00

66,204.13

497,125.00

73,100.85

Jan-94

63,888.00

57,727.27

37,878.00

47,411.30

Feb-94

106,005.00

1,945.85

224,802.00

64,672.95

Mar-94

83,284.00

1,942.05

216,590.00

59,290.95

Apr-94

15,747.00

125,121.53

292,345.00

49,925.35

May-94

55,410.00

1,022,275.45

228,580.00

56,609.60

Jun-94

207,507.00

298,151.93

98,022.00

65,563.80

Jul-94

43,857.00

182,252.77

50,948.00

58,163.90

Aug-94

62,349.00

576,368.20

101,476.00

57,266.95

Sep-94

10,125.00

2,813.90

226,467.00

47,678.05

Oct-94

26,592.00

64,115.20

112,239.00

44,143.40

Nov-94

25,737.00

20,463.10

309,909.00

300,312.27

Dec-94

40,506.00

128,805.57

365,157.00

85,704.35

Jan-95

35,118.00

179,740.70

6,621.00

31,202.80

Feb-95

46,684.30

2,856.00

15,919.00

44,765.20

Mar-95

27,636.00

2,108.25

123,943.00

65,230.60

Apr-95

4,986.00

22,366.80

281,830.00

43,157.00

May-95

22,184.30

24,468.50

204,971.00

49,828.00

Jun-95

49,196.50

137,404.30

79,836.00

253,656.63

Jul-95

0.00

2,749.98

84,212.00

291,572.30

Aug-95

3,600.00

3,921.00

53,507.00

44,850.70

Sep-95

59,589.00

11,351.55

61,854.00

36,098.30

Oct-95

205,669.50

5,652.00

13,261.00

244,618.50

Nov-95

130,863.80

28,858.40

224,037.00

46,820.13

Dec-95

55,140.00

85,730.80

58,571.00

42,127.75

Jan-96

88,128.20

32,675.23

19,889.00

58,477.55

Feb-96

179,979.10

6,673.15

115,244.00

76,721.75

Mar-96

149,403.00

8,008.20

17,372.00

57,250.90

Apr-96

137,732.30

36,303.23

70,171.00

56,238.75

May-96

138,771.00

304,043.18

123,066.00

66,894.90

Jun-96

133,998.00

96,978.43

181,541.00

62,116.70

Jul-96

34,402.00

72,280.38

22,573.00

56,540.10

Aug-96

100,982.00

101,314.52

15,132.00

57,564.85

Sep-96

25,954.50

34,728.65

248,374.00

38,865.85

Oct-96

80,223.60

38,853.70

47,562.00

235,678.85

Nov-96

97,574.70

10,353.35

99,833.00

86,673.35

Dec-96

155,232.55

45,018.80

290,850.00

30,647.15

Jan-97

123,383.20

161,004.30

7,788.00

69,762.35

Feb-97

199,219.70

90,696.00

7,148.00

41,515.45

Mar-97

216,923.00

46,972.95

63,253.00

49,048.90

Apr-97

251,432.00

44,003.20

697,509.00

47,140.00

May-97

502,977.85

30,159.32

155,454.00

93,267.90

Jun-97

547,987.40

30,686.30

13,417.00

57,735.30

Jul-97

452,420.00

21,096.45

3,751.00

38,411.25

Aug-97
Sep-97
Oct-97

Nov-97
Dec-97
Jan-98
Feb-98

51,042.00

1,835.25

12,892.00

23,016.12

Mar-98

216,798.00

15,189.48

142,377.00

29,509.90

Apr-98

6,888.00

33,180.12

233,110.00

237,245.33

May-98

402,185.30

42,003.20

207,678.00

37,903.92

Jun-98

179,351.90

8,420.30

13,471.00

57,640.02

Jul-98

154,964.40

3,751.15

22,442.00

67,041.35

Aug-98

255,661.00

78,688.35

373,486.00

47,891.60

Sep-98

329,362.90

528.45

365,242.00

49,625.30

Oct-98

409,924.90

706,765.30

3,220.00

40,335.27

Nov-98

300,261.20

899,359.70

780,586.00

25,894.67

Dec-98

199,486.90

71,153.55

426,599.00

34,842.73

Jan-99

239,540.70

5,278.60

4,849.00

34,341.58

Feb-99

202,214.50

0.00

226,775.00

50,755.60

Mar-99

244,456.00

300,000.00

516,603.00

162,951.07

Apr-99

135,708.00

1,049.40

38,544.00

126,532.97

May-99

116,241.00

836.65

143,258.00

85,931.45

Jun-99

305,985.40

0.00

258,471.00

114,059.22

Jul-99

193,570.50

541.75

131,634.00

209,086.80

Aug-99

281,760.00

0.00

12,393.00

95,752.83

Sep-99

230,132.50

15,454.98

20,595.00

57,793.25

Oct-99

202,075.00

669.20

87,109.00

117,560.53

Nov-99

343,926.55

0.00

250,785.00

49,087.97

Dec-99

338,751.00

0.00

473,692.00

38,129.68

Jan-00

295,651.00

887.00

162,391.00

49,528.42

Feb-00

414,494.00

0.00

92,656.00

49,365.63

Mar-00

294,717.00

0.00

287,522.00

101,260.07

Apr-00

202,891.60

1,418.90

888,665.00

46,190.45

May-00

113,160.00

35,782.25

1,904.00

57,833.35

Jun-00

158,005.00

78,574.32

13,019.00

51,952.15

Jul-00

217,719.70

42,656.53

14,613.00

75,711.50

Feb-01

1,000,918.00

76,062.00

10,842.00

15,740.85

Mar-01

295,339.00

15,252.60

78,514.00

101,112.77

Apr-01

438,613.65

33,020.80

898,806.00

79,438.60

May-01

476,311.20

12,616.00

31,606.00

55,779.05

Aug-00
Sep-00
Oct-00
Nov-00
Dec-00
Jan-01

Jun-01

240,974.00

439.00

23,500.00

59,903.60

Jul-01

297,155.00

585.70

50,850.00

181,757.35

Aug-01

674,192.50

0.00

546,573.00

215,119.93

Sep-01

151,970.00

511.50

315,060.00

74,588.87

Oct-01

107,983.50

0.00

485,866.00

146,374.82

Nov-01

127,254.00

572.40

553,705.00

99,400.80

Dec-01

172,701.00

0.00

457,281.00

134,440.05

Jan-02

97,540.00

1,856.88

75,246.00

55,962.98

Feb-02

186,039.50

12,400.00

146,978.00

73,961.33

Mar-02

273,878.95

2,669.50

48,937.00

54,078.15

Apr-02

153,588.45

3,594.70

80,264.00

184,334.42

May-02

141,577.20

0.00

92,276.00

86,812.15

Jun-02

101,424.00

0.00

100,298.00

61,564.60

Jul-02

77,450.15

0.00

6,828.00

38,648.30

Aug-02

95,793.00

0.00

192,896.00

42,243.35

Sep-02

26,519.00

0.00

43,261.00

84,601.35

Oct-02

153,122.00

18,441.85

204,600.00

39,448.90

Nov-02

64,903.75

13,446.30

666,366.00

36,393.90

Dec-02

52,639.00

11,822.32

461,310.00

134,852.70

Jan-03

16,509.00

45,754.70

87,529.00

53,628.35

Table A9. Calculation of Withdrawal Revenue

Revenue

Change in
VOC
Interest Due

VOC Interest

Holland
Interest

"Withdrawal"
Revenue

Metal Outflow
through
Specie Kamer

Ratio

1666

39,934

-4,025

-11,750

-8673

15,487

2,049,670

0.76%

1667

57,861

-2,361

-26,667

-8673

20,141

2,560,011

0.79%

1668

74,949

-10,022

-35,933

-8673

20,340

2,431,159

0.84%

1669

42,313

18,333

-46,283

-8673

5,690

610,589

0.93%

1670

20,861

-8673

12,189

1,555,197

0.78%

1671

56,491

-6,362

-8673

41,633

3,344,676

1.24%

1672

88,594

-800

-8673

79,119

3,617,700

2.19%

1674

28,794

-942

-8673

19,177

1,189,420

1.61%

1675

49,354

-8,489

-8673

32,193

1,696,559

1.90%

1676

57,506

-15,507

-32,678

-8673

647

482,826

0.13%

1677

74,023

-35,506

-5,509

-8673

24,336

1678

74,636

37,680

-99,455

-8673

4,186

417,590

1.00%

1679

78,004

-64,000

-8673

5,332

92,651

5.75%

1680

63,534

5,000

-56,111

-8673

3,750

374,407

1.00%

1681

79,889

3,333

-41,789

-8673

32,760

1,842,897

1.78%

1682

56,497

1,667

-31,745

-8260

18,159

1683

42,598

-1,866

-18,689

-8260

13,782

2,068,942

0.67%

1684

64,987

5,199

-8260

61,926

Fiscal
Year

1673

Source: van Dillen 1925: 701-807, and authors’ calculation.

Table A10. The VOC-AWB Credit Relationship
1

VOC External Debt

FY Ending

AWB Loans
in bank
guilders

in current guilders

AWB's
Share

AWB Lending

VOC
Expenditures

AWB’s
Share

4/30/1667

300,000

12,068,477

300,000

7,767,160

4/30/1668

600,000

14,776,188

800,000

10,358,418

4/30/1669

1,100,000

15,584,693

1,600,000

9,962,440

17%

4/30/1670

100,000

14,205,462

500,000

7,408,009

4/15/1671

12,254,925

8,042,724

4/15/1672

11,779,872

1,300,000

8,440,686

16%

4/15/1673

14,456,424

5,970,759

4/15/1674

13,392,636

4,863,855

4/15/1675

12,558,813

700,000

8,688,494

4/15/1676

13,099,801

1,850,000

8,960,247

22%

4/15/1677

1,200,000

11,513,962

11%

700,000

9,553,385

4/15/1678

800,000

12,289,233

1,600,000

8,277,794

20%

4/15/1679

1,500,000

12,205,185

13%

100,000

5,953,366

5/31/1680

1,600,000

11,175,629

15%

8,238,865

5/31/1681

1,300,000

11,050,717

12%

8,030,878

5/31/1682

1,000,000

10,397,454

10%

500,000

8,738,099

5/31/1683

600,000

8,254,522

1,500,000

7,711,769

20%

5/31/1684

8,509,926

1,200,000

7,902,883

16%

5/31/1685

400,000

9,320,289

1,200,000

9,342,818

13%

5/31/1686

1,200,000

9,379,135

13%

2,600,000

9,213,639

29%

5/31/1687

1,800,000

8,526,588

22%

2,100,000

9,101,201

24%

5/31/1688

2,000,000

7,618,671

27%

1,000,000

9,762,741

11%

5/31/1689

600,000

7,168,758

1,200,000

9,084,777

14%

5/31/1690

700,000

7,502,565

10%

1,000,000

8,679,884

12%

5/31/1691

600,000

6,540,960

10%

200,000

8,737,656

5/31/1692

6,930,417

1,400,000

8,056,246

18%

5/31/1693

6,566,856

400,000

11,020,009

5/31/1694

7,172,006

1,800,000

10,718,641

18%

5/31/1695

200,000

7,134,778

1,950,000

10,275,190

20%

5/31/1696

250,000

6,578,286

1,150,000

11,217,275

11%

5/31/1697

7,441,164

1,900,000

11,153,469

18%

5/31/1698

8,790,546

3,000,000

8,863,991

35%

5/31/1699

7,637,538

1,200,000

15,054,157

5/31/1700

7,565,911

1,300,000

11,332,523

12%

5/31/1701

8,723,226

3,600,000

13,783,169

27%

5/31/1702

1,000,000

8,730,226

12%

3,300,000

12,399,812

28%

Source: VOC data from de Korte (1984: 1A-1C).

Appendix B. Theoretical illustrations
This appendix offers a formal examination of the efficiency gains stemming from changes
in the AWB’s credit policies following the 1683 reform. The model environment considered
builds in a natural financial intermediary and payments provider role for the Bank of Amsterdam, i.e., the bank is endowed with advantages in these capacities. The model then traces
through the consequences of the bank’s transition to a fiat standard.
Time is discrete and infinite in the model environment. Time is indexed by t, and each period (which can be thought of as a “year” for convenience) is subdivided into 3 stages {0,1,2},
referred to as winter, spring/summer, and autumn. There are 2 classes of agents, domestic and
foreign. Foreign agents have measure 1 and domestic agents have measure ½.64 Agents are ex
ante identical within a class. Domestic agents coordinate their production and consumption decisions and function as a single agent. In addition to private agents, there is an exchange bank
whose activities are described below. Economic activity takes place in 2 locations, the domestic
economy (“Amsterdam”) and elsewhere (“abroad”).
Synopsis of the model
The model incorporates a stylized cycle of trade. Foreign agents (natural lenders) earn silver
abroad in the winter and bring it to Amsterdam in spring, in search of trading opportunities. Silver is exchanged with the coalition of domestic agents (a natural borrower) in return for bank
money that can be used to purchase goods in Amsterdam. Domestic agents use the silver they
obtain for consumption abroad, while engaged in productive activities (overseas expeditions) that
do not return goods until the autumn of the same year.
At the beginning of autumn, some foreign agents experience a liquidity (i.e., preference)
shock, meaning they must depart Amsterdam in order to consume. Also in autumn, goods arrive
in Amsterdam from summer productive activities undertaken by domestic agents. Foreign agents
not experiencing a liquidity shock may either purchase these goods with bank money, or may
choose to liquidate their bank balances for silver, which can then be used to purchase consumption goods abroad. Table 1 summarizes the timing of actions in the model.

The labels “domestic” and “foreign” are more handy than accurate. “Long-term participants in the Amsterdam
markets” and “opportunistic participants” might be more exact.

Table 1: Timing of actions in the model
Time of year

Foreign agents
(overlapping generations)
Young foreign agents trade production goods
abroad for silver
Young arrive in Amsterdam; trade silver for
bank money; old (liquidity constrained) trade
money for silver and depart Amsterdam
Old, liquidity-constrained agents purchase consumption goods abroad

Winter (stage 0)
Spring (stage 1a)
Summer (stage
1b)
Early autumn
(stage 2a)
Autumn (stage
2b)

Liquidity shock revealed for young agents
If liquidity shock
No action; wait to
trade money for silver next period

If no shock
Use money to purchase
goods from domestic
agents & consume

Domestic agents
(infinitely lived)
Trade money for silver
in Amsterdam
Use silver to purchase
consumption abroad;
Begin production
Goods arrive in Amsterdam from summer production
Sell goods to domestic
agents for money

Commodities and feasible trades
There are 3 commodities: a nondurable general consumption good, a nondurable special consumption good, and a durable good, silver, which is used for only for trade. Silver can be stored
at negligible cost.
All trading outside Amsterdam is of silver for the other goods, and always at the world price
of φ units of silver per good, normalized to φ = 1 for both goods. All trading within Amsterdam is
of goods for money (bank balances, described below). For expositional clarity, domestic agents
may not purchase silver by issuing IOUs to foreign agents.65 Likewise, foreign agents may not
directly purchase special goods from domestic agents with silver, but must use money to make
their purchases. Finally, domestic agents must sell their special good production in their “home
market,” Amsterdam.

This constraint could be partially relaxed without qualitatively changing the model results. What matters is that
foreign agents are less willing to accept domestic agents’ debt than is the bank.

Preferences, endowments, and technologies
Each generation of foreign agents lives for 2 years. A generation-t foreign agent is born
abroad in stage 0 of the year t and can produce x0t units of the general good for sale on the world
market. He (typically) journeys to Amsterdam in stage 1, although the agent always has the option of remaining abroad and trading exclusively in the world market. At the beginning of stage
2, a foreign agent experiences a shock that determines his preferences for general good versus
special good consumption. The utility of a generation-t foreign agent i is

Ut = − x0i t + λ2i t β u(c1,i t +1 ) + (1 − λ2i t )u( f 2it )

(4)

where β is an annual discount factor, c1,i t +1 represents i’s consumption of the general good (which
takes place in the summer of year t + 1 ), f 2it represents his consumption of the special good
(which typically takes place in the autumn of year t),66 λ2i t is a preference shock, and u is a concave utility function. To allow for analytic results, we take u (c ) = c (1− ρ ) /(1 − ρ ) where ρ ∈ (0,1) .
The probability distribution for λ2t is

⎧1 with probability ½ ,
⎩0 with probability ½ .

λ2t = ⎨

(5)

An agent who receives a preference shock λ2t = 1 is said to be “liquidity constrained,” in the
sense that the agent only wants to consume the general good, which is only available abroad for
silver. The remaining (called “unconstrained”) foreign agents want to consume the special good,
either abroad or in Amsterdam, depending on market conditions. An agent’s type (constrained or
not) is private information.
Domestic agents are infinitely lived and have objective
∞

V = ∑ β t ( d1t − ax1t )

(6)

t =0

where d1t is the agent’s summer (stage 1) consumption of the general good abroad, x1t is the
summer production of the special good undertaken by the agent, and a ∈ (0, β ) . There is no discounting from spring to autumn. Productive effort x1t yields y2t = x1t special goods which are
brought to Amsterdam. Domestic agents cannot earn silver abroad, so silver for their general
66

This is a slight abuse of notation: the special good may also be purchased on the world market and consumed in
the spring of the next year, although this does not occur in the equilibria we consider.

good consumption must be obtained through trade in Amsterdam with foreign agents. Foreign
agents have an incentive to trade with domestic agents in the Amsterdam market, since domestic
agents can produce the special good at a cost below the world price of one.67
Silver can be held by domestic agents, foreign agents young or old, or the exchange bank
(described below). Let S1yt ( S1ot ) be the per-capita, non-negative amount of silver held by old foreign agents at the end of stage 1a money market trading, and let S1dt ( S 2dt ) be domestic agents’
stage 1a (stage 2) per-capita silver holdings (again nonnegative). The amount of silver (per domestic resident) held at the exchange bank after stage 1(2) trading is S1bt ( S2bt ) .

Efficient steady-state allocations
As a benchmark, we first consider efficient steady-state allocations. The planner maximizes
the population-weighted discounted utility of all agents, i.e.,
∞

W = V / 2 + ∑ β t E (U t )

(7)

t =0

over allocations ( x0t , x1t , d1t , c1t , f 2t , S1yt , S1ot , S1dt , S 2dt , S1bt ) . Feasibility constraints are

2 x0t + S2,d t −1 + S1,bt −1 + 2S1,yt −1 ≥ 2S1,yt + S1,ot + S1dt + S1bt ,

(8)

S1ot ≥ c1t ,

(9)

S1,dt ≥ d1,t

(10)

x1t ≥ f 2t .

(11)

Constraint (8) says that the total silver available to the Amsterdam economy in stage 1a consists
of silver imported by young foreigners plus any silver stored by domestic agents, the bank, and
old foreigners. Constraint (9) says that the general good consumption of foreigners is limited by
the amount of silver they have available. A similar constraint (10) applies to consumption by
domestic agents. Constraint (11) is the resource constraint on special good consumption by foreigners. The truth-telling condition for the planner’s problem is

u ( f 2t ) ≥ β u (c1,t +1 ) ,

(12)

I.e., the law of one price does not hold for special goods. Sufficient frictions operate in the background to allow
this situation to persist.

i.e., an unconstrained foreign agent must do at least as well by consuming domestically as he
could by reporting himself as a constrained agent, accepting a silver payment, and then using the
silver to purchase the special good abroad the following year. Participation constraints for foreign and domestic agents are
EU ,V ≥ 0 .

(13)

The set of planner’s allocations (superscript p) is described as
u′(c1p ) = 1, i.e., c1p = S1o , p = 1

(14)

u′( f 2p ) = a, i.e., f 2p = x1 = a − (1/ ρ )

(15)

d1p = S1d , p ∈ ⎡⎣ af 2p , d ⎤⎦ , where d = u (c1p ) + u ( f 2p ) − c1p

(16)

2 x0 = c1p + d1p

(17)

S2d , p = S1b , p = S1y , p = 0

(18)

Conditions (14) and (15) are standard optimality conditions. Note that truth-telling condition (12)
does not bind in the planner’s allocation. Condition (16) says that domestic agents’ consumption
is indeterminate between the bounds imposed by individual rationality for both classes of agents.
Condition (17) says that silver imports by young foreigners must be sufficient to cover general
good consumption by domestic agents and old foreigners. Silver carries an opportunity cost and
has no liquidity value over the winter, so the planner sets inter-period holdings of silver by domestic agents, the bank, and foreigners equal to zero (condition (18)).
The exchange bank

Money takes the form of balances at an exchange bank. Initially we assume the bank does
not engage in lending. More specifically, the exchange bank credits any deposits of silver into
the exchange bank at a fixed number of units of silver θ per florin of bank money, normalized to

θ = 1 . Withdrawals from the bank occur at a mandated price θ < 1 .
In the decentralized economy, money can be traded for silver in stage 1a. The market value
of money in terms of silver is θ units of silver per unit money (“florin”).68 Absence of arbitrage

I.e., the price of bank money is proportional to one plus the agio. As explained above, the actual agio expressed
the price of bank money relative to current money, whose metallic value could vary over time. While a model of
current money valuation could be incorporated in to the model, we abstract from this complication to keep notation
manageable.

requires that the market price of bank money be in the interval [θ ,1] . As long as the market price
of money is in this interval, there is (weakly) no incentive for agents to deposit or withdraw silver from the bank: hence, for steady states (i.e., for constant θ ) we exclude the possibility of
deposits or withdrawals.
However, anyone with funds at the exchange bank has the option of withdrawing funds from
the bank at any time. Suppose that at a given moment the bank has liabilities (accounts) of M
florins per domestic resident and holds S b units of silver (“coins”) in its vault. Strictly speaking,
the depositors’ right of withdrawal means that the exchange bank faces a liquidity constraint on
its metal-to-deposit ratio S b / M

Sb / M ≥ θ .

(19)

Taken at face value, this would require that the bank maintain a metal-to-deposit ratio of around
98 percent. As we have seen above, in practice the AWB was generally able operate with a
smaller ratio. Hence (19) is modified to
S b / M ≥ δθ ,

(20)

for some “comfort factor” δ < 1.
The special consumption good is traded in Amsterdam in stage 2 at money price pt . Since
unconstrained foreigners can choose where to consume the special good in stage 2, the silverequivalent price of special goods in Amsterdam σ t ≡ (θt pt ) (i.e., the terms of trade for domestic
agents) can be no greater the silver price of goods abroad (one).
Steady-state monetary equilibria

In the decentralized economy, young foreign agents wishing to purchase goods in Amsterdam must first use their silver earnings to purchase money holdings M 1yt . Foreign agents maximize the expectation of utility (4) over x0 , c1 , f 2 , M 1y , and S1y , taking prices as given, subject
to budget constraints
x0t = θt M 1yt + S1yt

(21)

Following the Diamond-Dybvig tradition, constraint (19) could be motivated as necessary to prevent sunspotbased runs on the exchange bank. Runs can occur since types are unobservable and unconstrained agents can always
obtain the special good abroad.

θt +1M1yt + S1yt ≥ c1,t +1

(22)

M ty ≥ pt f 2t

(23)

Steady-state optimality conditions for foreign agents reduce to

(½) ( βσ u′(σ f 2 ) + u′( f 2 ) ) = σ

(24)

In addition, it can be shown that a young foreign agent will always liquidate his silver earnings
for money. If he is unconstrained, he will spend this money to purchase the special good; if he is
constrained, he will trade it the following year to obtain silver to purchase the general good.
Condition (24) implicitly defines a function σ = g ( f 2 ) where g can be shown to be strictly
decreasing and strictly convex for coefficient of relative risk aversion ρ ∈ (0,1) . The inverse
demand curve for special goods σ ( f 2 ) is then given by

⎧ 1, for f 2 < 1,
.
⎩ g ( f 2 ), for f 2 ≥ 1.

σ ( f2 ) = ⎨

(25)

The kink in the inverse demand curve occurs because the domestic silver-equivalent price for the
special good cannot exceed the world price of unity. Domestic agents’ total revenue from special
good sales can then be expressed as
TR ( f 2 ) = f 2σ ( f 2 )

(26)

which can be shown to be strictly increasing and concave (strictly for f 2 > 1 ).
A domestic agent in the decentralized economy maximizes his objective (6) subject to stage
1a, stage 1b, and stage 2 budget constraints

S2,d t −1 + θt M 2,d t −1 ≥ S1dt + θt M1dt

(27)

S1dt ≥ d1t + S2dt

(28)

M 1dt + pt x1t ≥ M 2dt

(29)

over d1t , x1t , S1dt , S 2dt , M 1dt , M 2dt where M itd denotes the agent’s money holdings at the end of stage i
of period t. Production decisions x1t are made cooperatively, i.e., production is set so as to
maximize monopoly profits. Steady-state first-order conditions for domestic agents reduce to

1, if TR′(1) < a / β
⎧⎪
x1 = ⎨
−1
⎪⎩[TR′] ( a / β ) , if TR′(1) ≥ a / β
95

(30)

where TR′ is the right derivative of TR. That is, the coalition of domestic agents sets marginal
revenue TR′ from its sales of the special good equal to marginal cost (where the latter is adjusted
for the time cost of money), if this cost is sufficiently low. Otherwise, domestic agents produce
just enough of the special good to equate its silver-equivalent price in Amsterdam to the world
price.
A steady-state monetary equilibrium is an allocation, combined with a set of per-capita
money holdings M 1y , M 1d , M 2d , and prices p and θ ( = θ1 = θ 2 ) , for which (a) first-order conditions (24) and (30) hold, and (b) markets clear. Money market clearing in particular requires
M 2d = M 1y + M 1d ,

(31)

i.e., that sales of money by domestic agents M 2d − M 1d plus sales by old foreigners M 1y equal
purchases by young foreigners 2 M 1y . Equilibria are described as
Proposition 1. There is a continuum of steady-state monetary equilibria where

(1) Allocations, the silver-equivalent price of special goods σ = θ p , and the real stock of
bank money are the same in every equilibrium;
(2) The price of money and the money price of special goods are indeterminate in the inter-

⎡ σ⎤
vals θ ∈ [θ ,1] , p ∈ ⎢σ , ⎥ ;
⎣ θ⎦
(3) The nominal money stock varies with θ the according to
M = d1 / θ

(32)

where d1 is the equilibrium consumption of the general good by domestic agents;
(4) Money is held exclusively by foreigners over the summer, and by domestic agents and
old foreigners over the winter
M 2d = M 1y = M ; M 1d = 0 ;

(33)

(5) Neither domestic nor foreign agents store silver over the winter
S 2d = S1y = S1o = 0 ;

(34)

(6) The exchange bank stores sufficient silver to satisfy its liquidity constraint (20)

S1b = S2b = δθ M = δ (θ / θ ) d1 .

(35)

Proof (Sketch). There are two cases to consider.

Case 1: TR′(1) < a / β . In this case the equilibrium allocation can be derived as follows: from
(30), domestic agents produce just enough special goods to satisfy demand at the world silverequivalent price of one, so σ = 1 . From inverse demand (25) and market clearing, it follows that
d1 = f 2 = 1 . Using budget constraints (21) and (23), it follows that c1 = 1 .

The rest of the equilibrium is then constructed as follows. Absence of arbitrage in the money
⎡ σ⎤
market requires θ ∈ [θ ,1] ; hence if σ is determined it must be the case that p ∈ ⎢σ , ⎥ . For do⎣ θ⎦

mestic agents, holding silver over the summer is clearly dominated by consumption, hence their
summer money holdings are zero. All winter asset holdings by domestic agents then take the
form of money as in (32), and in equilibrium this must equal money expenditure by the unconstrained foreign agents as in (33).
Case 2: TR′(1) ≥ a / β . In this case, from (30), domestic agents optimally produce
x2 * = [TR′] (a / β ) , hence f 2 = f 2 * = x2 * from market clearing. Then from inverse demand (25),
−1

σ = σ * = σ ( f 2 *) < 1 ; using budget constraints (21)-(23) and (27)-(29), and market clearing, it
follows that c1 = d1 = d1* = f 2*σ ( f 2 *) = TR( f 2 *) . The rest of the equilibrium is constructed as in
the previous case.
Corollary. Any steady-state monetary equilibrium in the decentralized economy is inefficient.
Proof. In case 1, the equilibrium domestic agents’ general good consumption d1 and foreign

agents’ general good consumption c1 is in the set of planner’s allocations described by (14)-(18).
However, monopoly pricing by domestic agents causes the foreign agents’ consumption of the
special good f 2 to fall below its efficient value.
In case 2, foreign agents again underconsume the special good relative to the planner’s allocation due to monopoly pricing. Since foreign agents’ general good consumption (=domestic
agents’ consumption = TR) is greater than one in this case, it follows that foreign agents also
overconsume the general good.

In both cases, the relative price of the special good is higher than the corresponding shadow
price a in the planner’s allocation. Also, in both cases the bank inefficiently stores silver over the
winter as backing for agents’ money holdings, needed to fund next summer’s purchases of general goods.
Discussion

The steady-state monetary equilibrium mimics some features of the pre-1683 situation in
Amsterdam. Coin (silver) is traded for money and money for goods. The equilibrium stock of
bank money is constant over the trading “year” and its value lies anywhere between the bank’s
purchase price and sale price. The nominal stock of money can vary somewhat across steady
states. Essentially the economy functions on a “silver in advance” basis, i.e., trading in the domestic market proceeds as if domestic goods were traded for silver at price σ = pθ .
The inefficiency of the monetary equilibrium stems from three sources. The first source of
inefficiency is simply the deadweight cost of the silver S1b necessary to support the exchange
bank arrangement which, from (35), is decreasing in the market value of money θ. The second
source is the credit constraint on domestic agents, who must finance their stage 1 consumption
from their previous year’s earnings. The final source of inefficiency is the monopoly pricing undertaken by the domestic agents. The Corollary states that in equilibrium, these latter two factors
in combination lead to an inefficiently high relative price and diminished consumption of the
special good. Consumption of the general good may also be inefficiently subsidized.
Monetary steady states with receipts

A receipt system is now introduced into the model. Specifically, suppose that in addition to
its previous activities, the exchange bank is willing to issue receipts against deposited silver. The
receipt allows its holder to purchase the deposited amount of silver, at the price of θ = 1 .70
Under the receipt system, a foreign agent arriving in Amsterdam in stage 1 may sell silver in
two ways: (1) directly trade silver for bank funds, or (2) deposit the silver into the exchange
bank, thereby obtaining access to bank funds (at the bank’s purchase price θ = 1 units of silver
per florin) and a receipt, which can be sold for additional bank funds. The market value of the
receipt in stage 1a of period t is λt florins. Absence of arbitrage requires
70

For algebraic transparency, we ignore the small fees that were charged to redeem a receipt.

θt =

1
,
1 + λt

(36)

Under (36), a foreign agent is indifferent between trading silver on the open market and trading
receipts on deposited silver. Below we consider equilibria where an indifferent agent always
chooses to deposit his silver and sell receipts against some portion of it. Let D1 denote the
amount of silver deposited by a foreign agent in stage 1, and let L1 denote the quantity of receipts sold by the agent in stage 1 trading. When silver is traded exclusively as receipts, clearing
in the stage 1a silver market requires that
M 2d = (1 + λ ) L1

(37)

i.e., money held by domestic agents must cover the cost of redeeming deposited coin at full value
( θ = 1 ) plus the cost of the receipts necessary for redemption.
Using (36), it is then straightforward to show that foreign agents’ first-order condition (24) is
exactly as in the previous model. The domestic agents’ optimization problem is also unchanged
from the earlier analysis; in particular, condition (30) is identical with the no-receipt case.
A steady-state monetary equilibrium with receipts consists of, in addition to the list of quantities for a monetary equilibrium without receipts, a quantity of stage 1 deposits D1 and of receipts L1 , and a money price of receipts λ such that conditions (24) and (30) hold and markets
clear. From the foregoing discussion we have
Proposition 2. With receipts, there is a continuum of steady-state equilibria; each equilibrium is

identical to an equilibrium with receipts, except in the following details:

(

)

(1) The money price of receipts λ is indeterminate in the interval 0,θ −1 − 1 , where the implied silver value of money θ = 1/(1 + λ ) and the money price of domestic goods p fall in
the same ranges as in Proposition 1;
(2) Period 1 deposits of foreign agents are D1 = c1 ;
(3) Period 1 receipt sales of foreign agents are
L1 = θ M 2d = d1 ;
Discussion

(38)

Proposition 2 indicates that (absent aggregate liquidity shocks) the introduction of the receipt
system would not in of itself have changed real allocations in the Amsterdam money markets.
The value of bank money remains indeterminate and the inefficiency of the monetary equilibrium persists.
There is however a substantive difference between the equilibria described in Propositions 1
and 2. If bank money cannot be redeemed without a receipt, then following the money market
trades in stage 1a, the value of claims on the banks’ stock of silver would have also been reduced
relative to the no-receipt case. This would have expanded the scope for the bank’s credit activities.
Lending operations before receipts

In practice the operation of the AWB incurred costs, which were offset through earnings on
its loans. These elements are now introduced into the model.
Momentarily assume that the bank has access to sufficient capital so that its liquidity constraints are not binding. The annual operating cost of the exchange bank is γ > 0 , which is expressed in silver terms. The bank obtains silver by trading money for silver in the stage 1 markets
at price θ. This money is earned through loans to domestic agents in stage 1, which are repaid at
stage 2. Domestic agents may borrow up to qt Bt florins, where q is the bank’s discount and
Βt ≤ Apt x1t

(39)

for A ∈ ( 0,1) , i.e., a domestic agent can borrow at most a fraction A of his anticipated autumn
special goods sales. The bank’s breakeven constraint is

θt (1 − qt ) Bt −1 ≥ γ .

(40)

The bank does not seek to maximize profits from lending, but simply sets q to recover costs.
Domestic agents’ budget constraints (27) and (29) are replaced with
S2,d t −1 + θt ( M 2,d t −1 + qt Bt ) ≥ S1dt + θt M 1dt

(41)

M 1dt + pt x1t ≥ M 2dt + Bt

(42)

For a favorable discount ( q > β ), a domestic agent will borrow as much as possible and borrowing constraint (39) will bind. In this case the domestic agents’ first-order condition (30) becomes

100

1, if TR′(1) < a / β *
⎧⎪
x1 = ⎨
−1
⎪⎩[TR′] ( a / β *) , if TR′(1) ≥ a / β *

(43)

where β * = β * (A) = qA + β (1 − A) > β . The foreign agents’ problem does not change. Effectively,
the availability of credit lowers domestic agents’ marginal cost of producing special goods from
a / β to a / β * . An equilibrium in this case must satisfy (43) as well as the foreign agents’ first-

order condition and (24). Equilibria are described as
Proposition 3. For operating costs γ > 0 sufficiently small, there is a continuum of steady-state

monetary equilibria with exchange bank lending where
(1) Allocations, the silver-equivalent price of special goods σ = θ p , and the real stock of
bank money are the same in every equilibrium;
(2) The price of money and the money price of special goods are indeterminate as in Proposition 1;
(3) The summer (end of period 1) nominal money stock varies with θ the according to
M = d1 / θ

(44)

where d1 is the equilibrium consumption of the general good by domestic agents;
(4) Money is held exclusively by foreigners over the summer and domestic agents over the
winter
M 1y = M 2d + qB = M ; M 1d = 0 ;

(45)

(5) Neither domestic nor foreign agents store silver over the winter
S 2d = S1y = S1o = 0 ;

(46)

(6) The exchange bank stores sufficient silver to satisfy its liquidity constraint (20)

S1b = S2b = δθ M = δ (θ / θ ) d1 .

(47)

Proof. Since only the domestic agents’ first-order condition (43) is modified from the previous

cases, proof is by the same arguments.
Does lending by the exchange bank improve welfare? To answer this question, one must consider the capital costs of the bank’s lending program. If lending leads to an increase in consump-

101

tion by domestic agents d1 , then from (20) the bank must hold additional capital to maintain its
liquidity. As a reference case, imagine that bank’s stock of silver is obtained through a one-time,
lump-sum tax on domestic agents only.71 The following result then applies.
Corollary. The monetary equilibrium with lending is inefficient. However, for operating costs

γ > 0 sufficiently small, there is some equilibrium with lending that dominates the monetary
equilibrium without lending.
Proof. Inefficiency of the equilibrium with lending follows from the same arguments as in

Proposition 1.
We now compare equilibria with lending to the equilibrium without. Again two cases must
be considered. We consider the effects of a vanishingly small amount of lending (a small increase in the credit limit A over A = 0 ).
Case 1. TR′(1) < a / β . The silver-equivalent price of special goods σ is equal to 1 for both the
equilibrium with lending and the equilibrium without. In this case, allocations are same in both
equilibria, but domestic agents produce at (effectively) a lower unit cost ( = a / β * with lending
compared to a / β without). Thus, with lending, domestic agents’ utility increases and the exchange bank need hold no additional silver in order to satisfy its liquidity constraint. Foreign
agents’ utility is unaffected. Hence lending dominates for this case.
Case 2. TR′(1) ≥ a / β . The silver equivalent price of special goods σ is less than 1 in the
equilibrium without lending. Then it is straightforward to show introducing lending causes both a
decrease in σ and an increase in foreign agents’ utility.
Now consider the steady-state utility of domestic agents. Using (6) this is
d1 − af 2 − (1 − β ) Sb

(48)

when the bank’s silver holdings S b are financed by a lump-sum levy on domestic agents. Using
(43) and (47) rewrite expression (48) as
⎡⎣1 − (1 − β )δ (θ / θ ) ⎤⎦ TR ([TR′]−1 (a / β *) ) − [TR′]−1 (a / β *) .

(49)

I.e., direct taxation of foreign agents is not possible. As discussed previously, in practice the bank’s capital derived at least partly from accumulated profits on lending. Obtaining capital in this way would have imposed additional costs beyond the costs of the lump-sum levy considered here, but also would have shifted some of the bank’s
capital costs to foreigners.

102

The derivative of (49) with respect to A is

⎛ a ⎞
−(q − β ) ⎡⎣1 − (1 − β )δ (θ / θ ) − β *⎤⎦ ⎜
⎟
⎝ β *⎠

([TR′] )′ ⎛⎜⎝ βa* ⎞⎟⎠
−1

(50)

whose sign varies as the sign of

1 − (1 − β )δ (θ / θ ) − β * .

(51)

As γ → 0 and q → 1 , (51) is positive iff

1 − A > δ (θ / θ ) ,

(52)

and, since δ (θ / θ ) < 1 , condition (52) must hold for A > 0 sufficiently small. In words, domestic
agents’ utility is increased if lending is slightly increased from zero. Note, however, sufficiently
large increases in lending A may decrease domestic agents’ utility.
Discussion
The corollary to Proposition 3 shows that lending by the AWB could have increased welfare
even with a liquidity requirement such as (20). The need for substantial backing of bank money
would have imposed limits on the bank’s lending however. Beyond a certain point, the extra
profit obtained by increasing loans to domestic agents would have been outstripped by the attendant liquidity costs. From condition (52), the liquidity constraint could have been made less
binding only by lowering either the bank’s “bid price” for bank money θ or its liquidity “comfort factor” δ.
From the domestic agents’ point of view, monopoly profits on sales of special goods would
have been the necessary ingredient for their support of the banks’ lending operations. With competitive pricing of the special good, lending would have provided no benefit to domestic agents
and no incentive to support this activity.

Lending operations with receipts
We now consider in more detail how the introduction of receipts would have impacted the
bank’s liquidity constraints. In the pre-receipt equilibrium with lending, the year-t, beginning-ofstage 1a (after foreign agents arrive in Amsterdam but before trading) balance sheet of the bank
is

103

Table 2: Bank’s balance sheet
(beginning of stage 1, without receipts)
Assets

Liabilities + NW

Silver S2,b t −1

Balances M

Loans to domestic
agents B

and the bank’s liquidity constraint would be given by (20), i.e., Sb2,t −1 ≥ δθ M . After stage 1 trading (beginning of stage 2) is complete, the bank’s balance sheet is

Table 3: Bank’s balance sheet
(beginning of stage 2, without receipts)
Assets

Liabilities + NW

Silver S1,bt

Balances M

Loans to domestic
agents B

and the liquidity constraint is S1,bt ≥ δθ M . Since S1,bt = S2,b t −1 in equilibrium, the bank’s liquidity
constraint does not change from stage 1 to stage 2. After stage 2 trading is complete and loans
are repaid, the bank’s balance sheet is
Table 4: Bank’s balance sheet
(end of stage 2, without receipts)
Assets

Liabilities + NW

Silver S2,b t

Balances M 2d
NW

The liquidity constraint at this stage is S2,b t ≥ δθ M 2d , which, since S2,b t = S1,bt in equilibrium, is
implied by the previous liquidity constraints.
104

Now consider the bank’s balance sheets at the same stages under the receipt system. At the
beginning of money market trading stage 1a, the bank’s balance sheet is
Table 5: Bank’s balance sheet
(beginning of stage 1, with receipts)
Assets

Liabilities + NW

Silver S2,b t −1 + D1

Balances M of domestic agents

Loans to domestic agents B

Balances D1 of foreign agents
[of which D1 redeemable on demand]
NW

If the bank is only committed to pay coin against all outstanding receipts, its liquidity constraint
is

S2,b t −1 + D1 − L1 ≥ D1 − L1

(53)

S2,b t −1 + L1 ≥ 0 .

(54)

or simply

Following stage 1 trading, the bank’s balance sheet is

Table 6: Bank’s balance sheet
(beginning of stage 2, with receipts)
Assets

Liabilities + NW

Silver S1,bt = S2,b t −1 + D1 − L1

Balances D1 + λ L1 of foreign agents
[ D1 − L1 redeemable on demand]

Loans to domestic agents B
NW

If the bank is committed to pay coin against all outstanding receipts, its liquidity constraint is

S2,b t −1 + D1 − L1 ≥ D1 − L1
or

105

(55)

S2,b t −1 ≥ 0

(56)

Finally, after stage 2 trading is complete, the bank’s balance sheet contracts to

Table 7: Bank’s balance sheet
(end of stage 2, with receipts)
Assets

Liabilities + NW

Silver S2,b t = S2,b t −1

Balances M 2d
NW

Since all receipts have been redeemed by this point, there is no liquidity constraint on the bank.
To summarize, these calculations indicate that under the receipt system, an expansion of the
bank’s lending B need not be backed by an expansion of its silver holdings S b , essentially because, under receipts, the bank’s liquidity constraint is slackened from (47) (in its equilibrium
form) to (56). Indeed, in the steady-state world analyzed here, it is conceivable that the bank
holds no silver over the winter. To avoid indeterminacy of the silver price of money θ in particular, however, we assume that the bank must commit (off-equilibrium) to sell silver (i.e., receipts)
at its target price, and possess “enough” silver S > 0 to back this pledge.
This does not explain how large S must be to guarantee determinacy. As a benchmark for
the comparisons below, we take S to be the value of S 2b necessary to support the monetary equilibrium without lending, i.e., S = S2b as specified in (35).
Our last set of results confirms agents’ preferences for the receipts arrangement:
Proposition 4. With receipts, the monetary equilibrium with lending A is identical to the equilibrium given in Proposition 3, except that the bank’s winter silver stock S 2b is reduced to S .
Proof. As in Proposition 2, optimality conditions and market clearing are not affected by the introduction of receipts.

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Corollary 1. For a given credit limit parameter A , the equilibrium with receipts dominates the
equilibrium without receipts.
Proof. Decreasing the bank’s winter silver holdings (as occurs with the introduction of receipts)
does not change allocations of consumption goods, and lowers the deadweight loss.
Corollary 2. Under receipts, welfare is increasing in A .
Proof. With receipts, an expansion of lending A does not result in an increase in the bank’s winter silver holdings Sb2 . From (47), the bank’s summer silver stock S1b increases but this is occurs
through voluntary deposits by foreign agents; domestic agents bear no additional liquidity cost.
Hence this cost does not enter into welfare comparisons.
Increasing A increases domestic agents’ welfare increases because, from (43), this lowers
their marginal costs of production, while their marginal revenue from special good sales remains
the same.
Foreign agents’ welfare increases as in Proposition 3; hence, total welfare increases.

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Full text of Working Papers (Federal Reserve Bank of Atlanta) : How Amsterdam Got Fiat Money, Working Paper 2010-17

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