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The Rise and Fall of Paper Money in Yuan China, 1260-1368

Author

Listed:
  • Hanhui Guan
  • Nuno Palma
  • Meng Wu
Abstract
Following the Mongol invasion of China, the Yuan (1260–1368) dynasty was the first political regime to introduce a precious metal standard and deploy paper money as the sole legal tender. Drawing on a new dataset on money issues, prices, warfare, imperial grants, taxation, natural disasters, and population, we find that a silver standard initially consolidated the Chinese currency market. However, persistent fiscal pressures eventually compelled rulers to ease the monetary standard, and a fiat standard was adopted. We show that inflation was high in the early and late periods of the dynasty but remained moderate for nearly half a century. We find that military pressure, particularly civil war, generated fiscal demands that led to the over-issuance of money. By contrast, natural disasters and imperial grants did not trigger the over-issue of money. Warfare was much more likely to increase paper money issues under the fiat standard than during the silver standard period.

Suggested Citation

  • Hanhui Guan & Nuno Palma & Meng Wu, 2022. "The Rise and Fall of Paper Money in Yuan China, 1260-1368," Economics Discussion Paper Series 2207, Economics, The University of Manchester, revised Jan 2024.
    • Handle: RePEc:man:sespap:2207
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    File URL: http://hummedia.manchester.ac.uk/schools/soss/economics/discussionpapers/EDP-2207.pdf
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    References listed on IDEAS

    as
    1. von Glahn,Richard, 2016. "The Economic History of China," Cambridge Books, Cambridge University Press, number 9781107030565.
    2. Palma, Nuno, 2018. "Money and modernization in early modern England," Financial History Review, Cambridge University Press, vol. 25(3), pages 231-261, December.
    3. Meng Wu, 2018. "How Did the Chinese Shanxi Merchants Determine the Remittance Fees? Micro Firm Analysis of Rishengchang," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 13(3), pages 484-504, September.
    4. Gordon Tullock, 1957. "Paper Money-A Cycle In Cathay," Economic History Review, Economic History Society, vol. 9(3), pages 393-407, April.
    5. von Glahn,Richard, 2016. "The Economic History of China," Cambridge Books, Cambridge University Press, number 9781107615700.
    6. Patrick K O'Brien & Nuno Palma, 2020. "Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797–1821," European Review of Economic History, European Historical Economics Society, vol. 24(2), pages 390-426.
    7. Ma, Debin & Zhao, Liuyan, 2020. "A silver transformation: Chinese monetary integration in times of political disintegration, 1898–1933," LSE Research Online Documents on Economics 104056, London School of Economics and Political Science, LSE Library.
    8. Debin Ma & Liuyan Zhao, 2020. "A silver transformation: Chinese monetary integration in times of political disintegration, 1898–1933," Economic History Review, Economic History Society, vol. 73(2), pages 513-539, May.
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    Cited by:

    1. Adam Brzezinski & Nuno Palma & François R. Velde, 2024. "Understanding Money Using Historical Evidence," Annual Review of Economics, Annual Reviews, vol. 16(1), pages 571-595, August.

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    More about this item

    Keywords

    Paper money; silver standard; fiat money; Yuan China;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East

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