The Bank of Amsterdam’s Search for Success and Stability

Abstract

To succeed as a source of international money, the Bank of Amsterdam had to make its ledger money more of a complement to coins than a substitute for coins. To steady both the quantity and price of its money, the Bank actively used open market operations, buying trade coins with credits of bank accounts and selling domestic coins to debit bank accounts. The result was a stable money in great demand for most of the 1700s, save for two exceptions. During the Seven Years War, people put more coins into the Bank than it could sterilize. During the Fourth Anglo-Dutch War, in contrast, the Bank became permanently unpopular. The Bank’s rise and fall demonstrate the difficulties in acquiring and then maintaining a dominant monetary status.

Views expressed are those of the authors and not those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. The authors are grateful to Lilia Costabile, Larry Neal, and participants in the Banco di Napoli’s conference The Rise of Modern Banking in Naples.