The restriction of silver banknotes circulation in the Kingdom of Serbia before and during World War One

Abstract

State interventionism, which was present in the economic policy of the Kingdom of Serbia in the late 19th and early 20th century, significantly put at risk the implementation of the main tasks of the central Serbian issuing institution to develop the Serbian economy with cheap loans. The state intervention measures introduced in 1894 restricted the circulation of banknotes in silver. A direct consequence of the restricted circulation of money in the late 1880s and early 1890s was the emergence of the phenomenon of agio. After contrary views of the royal government and the National Bank on the issue of agio had been expressed, the state restricted the volume of the silver banknotes circulation by law. It is exactly the aim of this paper to highlight the effects produced by the state intervention in the operations of the National Bank, and the impact thus made on the economic activity and macroeconomic balance.

Keywords

• bimetallism
• restriction of money circulation
• state interventionism
• agio