IDEAS home Printed from https://ideas.repec.org/a/eee/inecon/v145y2023ics0022199623001137.html
   My bibliography  Save this article

The effects of countercyclical interest rates: Evidence from the classical gold standard

Author

Listed:
  • Mitchener, Kris James
  • Pina, Gonçalo

Abstract

We estimate the impact of countercyclical interest rates on macroeconomic outcomes in open economies. To identify countercyclical interest rates, we construct a new database of short-term interest rates, principal exports, and commodity prices for 40 economies from 1870–1913. Specialization and trade integration subjected economies to a “commodity lottery” in the form of price fluctuations in world markets. Capital mobility and a currency peg exposed them to interest-rate movements originating in the U.K., the largest economy and linchpin of the classical gold standard. We use these two exogenous shocks to identify positive effects of commodity-export prices on real GDP and the domestic price level and negative effects of exogenous changes in short-term interest rates on the same variables. We show that countercyclical interest rates, defined relative to export-price shocks, stabilized both output and the domestic price level. This stabilization was more effective for the price level than for output.

Suggested Citation

  • Mitchener, Kris James & Pina, Gonçalo, 2023. "The effects of countercyclical interest rates: Evidence from the classical gold standard," Journal of International Economics, Elsevier, vol. 145(C).
    • Handle: RePEc:eee:inecon:v:145:y:2023:i:c:s0022199623001137
    DOI: 10.1016/j.jinteco.2023.103827
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022199623001137
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jinteco.2023.103827?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:145:y:2023:i:c:s0022199623001137. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.