Respondentia: The alternative contract for global trade finance in the Early Modern period

Abstract

By specifying the specie on which returns were to be repaid respondentia was an efficient instrument to carry trade in which silver was «essential» for the continuation of commerce. As silver was imported as specie, where a multiplicity of means of payments existed and silver was the preferred money, it performed as foreign currency. Without common standards for foreign coins created issues for trade, the pricing of specie, and exchange rates. Eighteenth century Europeans alternatively used respondentia or bills depending on the monetary context, casting a doubt on the inherent efficiency of a cashless means of payment. Bills of exchange did not circulate outside Europe where cash had a premium. As the intermediary Europe developed means to regulate the price of foreign coins and exchange rates. Elsewhere respondentia had an advantage over bills; it allowed to hedge against uncertainty and propitiated arbitrage profits.