Monetary policy without its own currency? Luxembourg in the penumbra of the Latin Monetary Union (1865–1914/1926) and the German Customs Union (1842–1919)

Abstract

peer reviewedLocated between two large economic and currency blocs, the small state of Luxembourg managed to take an intermediate position in monetary policy issues during the major reorganization of the continental European currency areas in the second half of the 19th century. In an independent way, the Grand Duchy followed currency convergence and harmonization measures instigated both by the German side and by the Latin Monetary Union led by France. By issuing coins without precious metal value, the country generated a source of state income. One could speak of an early sovereignty niche in this context. However, Luxembourg’s coinage strategy mainly aimed at providing an adequate circulation of small change for its economy and administration. Keywords: Luxembourg, 19th century, monetary policy, small money, small state, seigniorage JEL Codes: N13, E42, E5