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An exorbitant privilege in the first age of international financial integration?

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  • van Hombeeck, Carlos Eduardo

Abstract

Whether the United Kingdom enjoyed an exorbitant privilege over the period 1871–1914 is analysed with a new dataset. The use of microdata on financial securities sheds light on some issues arising from US studies. A monthly proxy for the British international investment position and estimates of returns are constructed, pointing to an average benefit of 8.3% of GDP, with high variation. The finding supports the claim that exorbitant privilege is partly a general characteristic of the issuer of the global reserve currency. Nonetheless, there are fundamental differences between the two countries: Britain “grossed up” small returns by a large positive position.

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  • van Hombeeck, Carlos Eduardo, 2020. "An exorbitant privilege in the first age of international financial integration?," Journal of International Money and Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:jimfin:v:101:y:2020:i:c:s0261560619302153
    DOI: 10.1016/j.jimonfin.2019.102092
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    2. Patricia Gomez-Gonzalez & Gabriel Mathy, 2024. "The World's First Global Safe Asset: British Public Debt, 1718-1913," Fordham Economics Discussion Paper Series dp2024-01er:dp2024-01, Fordham University, Department of Economics.

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    More about this item

    Keywords

    Exorbitant privilege; International investment position; Global reserve currencies;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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