Advanced Search
MyIDEAS: Login to save this article or follow this journal

The Dollar-Pound Exchange Rate During the First Nine Months of World War II

Contents:

Author Info

  • Bryce Kanago

    ()

  • Ken McCormick

    ()

Abstract

Between August 25, 1939 and June 7, 1940, there was a free market for British pounds in New York. German success at the outset of World War II caused the value of free sterling to fall relative to the official exchange rate. This imposed an externality that made it more difficult for Britain to finance the war. Eventually, the externality became large enough that Britain chose to take extreme measures to abolish it, even at the expense of tarnishing the reputation of London’s financial markets. We collected daily data to investigate how the market reacted to war news and to policy changes. Using methods developed by Bai and Perron (Econometrica 66:47–78, 1998 ; Journal of Applied Econometrics 18:1–22, 2003 ), we find 17 breaks in the exchange rate. Fourteen are associated with military events and three are associated with policy changes. The episode illustrates how markets can fail to serve the public interest during times of war. Copyright International Atlantic Economic Society 2013

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1007/s11293-013-9380-4
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

Volume (Year): 41 (2013)
Issue (Month): 4 (December)
Pages: 385-404

as in new window
Handle: RePEc:kap:atlecj:v:41:y:2013:i:4:p:385-404

Contact details of provider:
Postal: Suite 650, International Tower, 229 Peachtree Street, N.E., Atlanta, GA 30303
Phone: (404) 965-1555
Fax: (404) 965-1556
Email:
Web page: http://springerlink.metapress.com/link.asp?id=112055
More information through EDIRC

Related research

Keywords: World war II; Exchange rates; The New York market for free sterling; F31; N24; N44;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Frey, Bruno S. & Kucher, Marcel, 2000. "History as Reflected in Capital Markets: The Case of World War II," The Journal of Economic History, Cambridge University Press, vol. 60(02), pages 468-496, June.
  2. Daniel Waldenström & Bruno S. Frey, 2007. "Did Nordic Countries Recognize the Gathering Storm of World War II? Evidence from the Bond Markets," IEW - Working Papers 336, Institute for Empirical Research in Economics - University of Zurich.
  3. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
  4. Frey, Bruno S & Kucher, Marcel, 2001. "Wars and Markets: How Bond Values Reflect the Second World War," Economica, London School of Economics and Political Science, vol. 68(271), pages 317-333, August.
  5. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  6. George J. Hall, 2002. "Exchange Rates and Casualties During the First World War," NBER Working Papers 9261, National Bureau of Economic Research, Inc.
  7. Brown, William O, Jr & Burdekin, Richard C K, 2002. "German Debt Traded in London during the Second World War: A British Perspective on Hitler," Economica, London School of Economics and Political Science, vol. 69(276), pages 655-69, November.
  8. Benjamin H. Higgins, 1949. "Lombard Street in War and Reconstruction," NBER Books, National Bureau of Economic Research, Inc, number higg49-1, October.
  9. Benjamin H. Higgins, 1949. "Introduction to "Lombard Street in War and Reconstruction"," NBER Chapters, in: Lombard Street in War and Reconstruction, pages 1-2 National Bureau of Economic Research, Inc.
  10. Phillips, Ronnie J., 1988. "War news and black market exchange rate deviations from purchasing power parity : Wartime South Vietnam," Journal of International Economics, Elsevier, vol. 25(3-4), pages 373-378, November.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:41:y:2013:i:4:p:385-404. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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