Foreign monies and exchange risk in pre-modern maritime private trade – (or why did European bills not circulate outside Europe?)

Abstract By specifying the currency on which returns were to be repaid, respondentia was a ubiquitous financial instrument to carry international trade. Where multiple currencies existed and silver specie was the preferred money, imported silver performed as foreign currency. Thus, the import of foreign coins created issues for prices, profits, and exchange rates. Eighteenth-century Europeans alternatively used respondentia or bills depending on the monetary context, casting a shade of doubt on the inherent efficiency of a cashless means of payment. Until the 1820s, private bills of exchange did not circulate where cash had a premium. Europeans developed means to regulate the price of foreign coins and exchange rates. Elsewhere, respondentia allowed for hedging against exchange risk and propitiated arbitrage profits, giving an advantage over bills. The article documents the global scope of the instrument; it explains the exchange nature of the contract and explores the issues that the respondentia came to solve. It highlights the role of monies of account Europeans used in pricing foreign currencies in international trade.