New world order: The emergence of an international monetary system, 1850 to 1913

In 1870 only four major nations used a gold standard, but, by 1910, nearly the entire world had adopted the gold standard. What explains this global institutional change? In this dissertation I study how nations came to adopt the gold standard in the late nineteenth and early twentieth century, the disappearance of French bimetallism in the 1870s, and the correlates of international trade from 1870 to 1910.; Three main themes run throughout this study. First, network externalities (the idea that a particular action increases in value as others partake in that activity) play a key role in explaining why various countries adhered to certain monetary institutions over time. Second, there are transaction costs in international trade which impede an otherwise efficient allocation of resources. As Ronald Coase (1960) pointed out, institutions play a key role in allocating resources because of these costs. Institutions matter, and the study of the evolution of the international monetary system is important. And finally, there is path dependence in the international monetary system. The size of the actors, first-movers and historical events are important for explaining the contour of the future. The end of bimetallism and the rise of the gold standard were path dependent outcomes.; Chapter 2 explores the disappearance of bimetallism. How did a seemingly functional arrangement, that originated in 1803 in France, suddenly vanish as a viable monetary system in Europe in the 1870s? French policy makers suspended bimetallism in 1873, hoping to reinstate it at a later date. Historical events generated the initial policy, and mental models mis-predicted future events and the outcome of the policy. The worldwide adoption of gold shifted precious metals demands making bimetallism susceptible to Gresham's Law by 1875 which inhibited reinstating bimetallism. I adapt and calibrate a formal model of bimetallism to show this.; In Chapter 3, J. Ernesto Lopez-Cordova and I apply a gravity model of trade to more than 1,100 country-pairs during the 1870--1910 period. We use cross-sectional and time-series variance in regime choice with a sample that includes a representative array of nations to quantify the historical relationship between monetary regimes and international trade.; In Chapter 4, I discuss the emergence of the classical gold standard. (Abstract shortened by UMI.)...