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The Stability of the Interwar Gold Exchange Standard: Did Politics Matter?

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  • WANDSCHNEIDER, KIRSTEN

Abstract

The collapse of the inter-war gold standard has frequently been studied in economic his-tory. This paper proposes a discrete time duration model to analyze how economic and polit-ical indicators affected the length of time a country remained on the gold standard. We rely on a panel data set of 24 countries over the years 1922-1938, and incorporate new measures of political and institutional variables. The results of this study identify high per capita income growth, large foreign currency and gold reserves, trade with other countries on gold, interna-tional creditor status, and the prior experience of hyperinflation as factors that increased the probability that a country would remain on gold. In contrast, democratic regimes that were exposed to a relatively high percentage of left-wing representation in parliament left the gold standard early. We also offer predicted survival probabilities for selected key countries on the gold standard. These survival rates show that Britain abandoned the gold exchange standard at a much higher survival probability, compared with other countries in the system.

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Bibliographic Info

Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 68 (2008)
Issue (Month): 01 (March)
Pages: 151-181

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Handle: RePEc:cup:jechis:v:68:y:2008:i:01:p:151-181_00

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References

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  1. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2004. "Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar Period," International Finance 0407008, EconWPA.
  2. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661926, December.
  3. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592, December.
  4. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441, December.
  5. Allan Drazen, 1999. "Political Contagion in Currency Crises," NBER Working Papers 7211, National Bureau of Economic Research, Inc.
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Cited by:
  1. Richard S. Grossman & Christopher M. Meissner, 2010. "International Aspects of the Great Depression and the Crisis of 2007: Similarities, Differences, and Lessons," Wesleyan Economics Working Papers 2010-002, Wesleyan University, Department of Economics, revised Aug 2010.
  2. Mathy, Gabriel P. & Meissner, Christopher M., 2011. "Business cycle co-movement: Evidence from the Great Depression," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 362-372.
  3. repec:cge:warwcg:131 is not listed on IDEAS
  4. Nikolaus Wolf, 2007. "Scylla and Charybdis: the European economy and Poland's adherence to gold, 1928-1936," LSE Research Online Documents on Economics 19659, London School of Economics and Political Science, LSE Library.
  5. Wolf, Nikolaus, 2008. "Scylla and Charybdis. Explaining Europe's exit from gold, January 1928-December 1936," Explorations in Economic History, Elsevier, vol. 45(4), pages 383-401, September.
  6. Kirsten Wandschneider & Nikolaus Wolf, 2010. "Shooting on a moving target: explaining European bank rates during the interwar period," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 2(1/2), pages 31-48.
  7. Nikolay NENOVSKY & Kiril TOCHKOV & Camelia TURCU, 2011. "From Prosperity to Depression: Bulgaria and Romania (1996/97 – 2010)," William Davidson Institute Working Papers Series wp1018, William Davidson Institute at the University of Michigan.
  8. Grossman, Richard S. & Imai, Masami, 2009. "Japan's return to gold: Turning points in the value of the yen during the 1920s," Explorations in Economic History, Elsevier, vol. 46(3), pages 314-323, July.
  9. Gabriel P. Mathy & Christopher M. Meissner, 2011. "Trade, Exchange Rate Regimes and Output Co-Movement: Evidence from the Great Depression," NBER Working Papers 16925, National Bureau of Economic Research, Inc.
  10. Paul Hallwood & Ronald MacDonald & Ian Marsh, 2011. "Remilitarization and the End of the Gold Bloc in 1936," De Economist, Springer, vol. 159(3), pages 305-321, September.
  11. Heinemeyer, Hans Christian, 2007. "The course of the great depression: a consistent business cycle dating approach," Discussion Papers 2007/14, Free University Berlin, School of Business & Economics.
  12. Mitchener, Kris James & Wandschneider, Kirsten, 2013. "Capital Controls and Recovery from the Financial Crisis of the 1930s," CAGE Online Working Paper Series 132, Competitive Advantage in the Global Economy (CAGE).

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