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The worldwide change in the behavior of interest rates and prices in 1914

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  • Barsky, Robert B.
  • Mankiw, N. Gregory
  • Miron, Jeffrey A.
  • Weill, David N.

Abstract

This paper evaluates the role of the destruction of the gold standard and the founding of the Federal Reserve, both of which occurred in 1914, in contributing to observed changes in the behavior of interest rates and prices after 1914. The paper presents a model of policy coordination in which the introduction of the Fed stabilizes interest rates, even if the gold standard remains intact, and it offers empirical evidence that the dismantling of the gold standard did not play a crucial role in precipitating the changes in interest rate behavior.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 32 (1988)
Issue (Month): 5 (June)
Pages: 1123-1147

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Handle: RePEc:eee:eecrev:v:32:y:1988:i:5:p:1123-1147

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  1. Miron, Jeffrey A, 1986. "Financial Panics, the Seasonality of the Nominal Interest Rate, and theFounding of the Fed," American Economic Review, American Economic Association, American Economic Association, vol. 76(1), pages 125-40, March.
  2. Barry Eichengreen, 1985. "International Policy Coordination In Historical Perspective: A View From The Interwar Years," NBER Chapters, in: International Economic Policy Coordination, pages 139-183 National Bureau of Economic Research, Inc.
  3. N. Gregory Mankiw, 1986. "The Term Structure of Interest Rates Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 61-110.
  4. Mankiw, N Gregory & Miron, Jeffrey A & Weil, David N, 1987. "The Adjustment of Expectations to a Change in Regime: A Study of the Founding of the Federal Reserve," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 358-74, June.
  5. Robert J. Shiller, 1980. "Can the Fed Control Real Interest Rates?," NBER Chapters, in: Rational Expectations and Economic Policy, pages 117-167 National Bureau of Economic Research, Inc.
  6. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  7. Clark, Truman A, 1986. "Interest Rate Seasonals and the Federal Reserve," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(1), pages 76-125, February.
  8. Shiller, Robert J & Siegel, Jeremy J, 1977. "The Gibson Paradox and Historical Movements in Real Interest Rates," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(5), pages 891-907, October.
  9. Oskar Morgenstern, 1959. "International Financial Transactions and Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number morg59-1, October.
  10. N. Gregory Mankiw & Jeffrey A. Miron, 1985. "The Changing Behavior of the Term Structure of Interest Rates," NBER Working Papers 1669, National Bureau of Economic Research, Inc.
  11. Timberlake, Richard H, Jr, 1984. "The Central Banking Role of Clearinghouse Associations," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 16(1), pages 1-15, February.
  12. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(5), pages 829-53, October.
  13. Robert J. Barro, 1988. "Interest-Rate Smoothing," NBER Working Papers 2581, National Bureau of Economic Research, Inc.
  14. Robert B. Barsky, 1986. "The Fisher Hypothesis and the Forecastability and Persistence of Inflation," NBER Working Papers 1927, National Bureau of Economic Research, Inc.
  15. Michael D. Bordo & Anna J. Schwartz, 1984. "A Retrospective on the Classical Gold Standard, 1821-1931," NBER Books, National Bureau of Economic Research, Inc, number bord84-1, October.
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Cited by:
  1. Eugene N. White, 2013. "Lessons from the Great American Real Estate Boom and Bust of the 1920s," NBER Chapters, in: Housing and Mortgage Markets in Historical Perspective, pages 115-158 National Bureau of Economic Research, Inc.
  2. Eugene N. White, 2011. "“To Establish a More Effective Supervision of Banking”: How the Birth of the Fed Altered Bank Supervision," NBER Working Papers 16825, National Bureau of Economic Research, Inc.
  3. Santos, Joseph, 2003. "Commodity futures contracts: Furnishing an elastic currency in the nineteenth century," Journal of Macroeconomics, Elsevier, Elsevier, vol. 25(4), pages 561-578, December.
  4. Goodfriend, M. & King, R.G., 1988. "Financial Deregulation, Monetary Policy, And Central Banking," RCER Working Papers 121, University of Rochester - Center for Economic Research (RCER).
  5. Wen, Yi, 1999. "The Business Cycle Effects of Seasonal Shocks," Working Papers 00-01, Cornell University, Center for Analytic Economics.
  6. Joseph H. Davis & Christopher Hanes & Paul W. Rhode, 2009. "Harvests and Business Cycles in Nineteenth-Century America," NBER Working Papers 14686, National Bureau of Economic Research, Inc.
  7. William D. Craighead & Pao-Lin Tien, 2013. "Nominal Shocks and Real Exchange Rates: Evidence from Two Centuries," Wesleyan Economics Working Papers 2013-002, Wesleyan University, Department of Economics.

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