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The Tale of Gresham’s Law

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Gresham’s law, which says that bad money tends to drive good money out of circulation, may account for many nations’ episodes of money troubles, as far back as ancient Athens. This Commentary discusses the two main explanations for Gresham’s law and suggests some circumstances in which the law does not apply.

Gresham’s law, which says that bad money tends to drive good money out of circulation, may account for many nations’ episodes of money troubles, as far back as ancient Athens. This Commentary discusses the two main explanations for Gresham’s law and suggests some circumstances in which the law does not apply.


Suggested citation: Dutu, Richard, Ed Nosal, and Guillaume Rocheteau, 2005. "The Tale of Gresham’s Law," Federal Reserve Bank of Cleveland, Economic Commentary, 10.01.2005.

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