Advanced Search
MyIDEAS: Login to save this book chapter or follow this series

Core, Periphery, Exchange Rate Regimes, and Globalization

In: Globalization in Historical Perspective

Contents:

Author Info

  • Michael D. Bordo
  • Marc Flandreau

Abstract

In this paper we focus on the different historical regime experiences of the core and the periphery. Before 1914 advanced countries adhered to gold while periphery countries either emulated the advanced countries or floated. Some peripheral countries were especially vulnerable to financial crises and debt default in large part because of their extensive external debt obligations denominated in core country currencies. This left them with the difficult choice of floating but restricting external borrowing or devoting considerable resources to maintaining an extra hard peg. Today while advanced countries can successfully float, emergers who are less financially mature and must borrow abroad in terms of advanced country currencies, are afraid to float for the same reason as their nineteenth century forbearers. To obtain access to foreign capital they may need a hard peg to the core country currencies. Thus the key distinction between core and periphery countries both then and now that we emphasize in this paper is financial maturity, evidenced in the ability to issue international securities denominated in domestic currency. Evidence in Section 2 from Feldstein-Horioka tests 1880-1997 agrees with the 'Folk' wisdom that financial integration was as high before 1914 as it is today. But the evidence suggests that it was not the exchange rate regime followed that mattered but the presence of capital controls. Moreover the financial integration observed for the recent period is largely an advanced country phenomenon Section 3 lays out the financial maturity hypothesis, presents narrative evidence for the pre-1914 period of the different experiences of the core and peripheral countries in adhering to the gold standard, and documents that for the emerging countries, plus ca change. Finally, Section 4 presents empirical evidence for core and peripheral countries 1880-1913 and today based on traditional money demand regressions suggesting a strong link between financial depth a

(This abstract was borrowed from another version of this item.)

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://www.nber.org/chapters/c9595.pdf
Download Restriction: no

Bibliographic Info

as in new window

This chapter was published in:

  • Michael D. Bordo & Alan M. Taylor & Jeffrey G. Williamson, 2003. "Globalization in Historical Perspective," NBER Books, National Bureau of Economic Research, Inc, number bord03-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9595.

    Handle: RePEc:nbr:nberch:9595

    Contact details of provider:
    Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Email:
    Web page: http://www.nber.org
    More information through EDIRC

    Related research

    Keywords:

    Other versions of this item:

    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. Tamim Bayoumi, 1990. "Saving-Investment Correlations: Immobile Capital, Government Policy, or Endogenous Behavior?," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 360-387, June.
    2. Bordo Michael D. & Kydland Finn E., 1995. "The Gold Standard As a Rule: An Essay in Exploration," Explorations in Economic History, Elsevier, Elsevier, vol. 32(4), pages 423-464, October.
    3. Maurice Obstfeld & Alan M. Taylor, 1997. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Working Papers 5960, National Bureau of Economic Research, Inc.
    4. Michael D. Bordo, 1992. "The Bretton Woods International Monetary System: An Historical Overview," NBER Working Papers 4033, National Bureau of Economic Research, Inc.
    5. Michael D. Bordo & Barry Eichengreen, 1997. "Implications of the Great Depression for the Development of the International Monetary System," NBER Working Papers 5883, National Bureau of Economic Research, Inc.
    6. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 90(358), pages 314-29, June.
    7. Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Scholarly Articles 3445091, Harvard University Department of Economics.
    8. Tattara, Giuseppe, 2003. "Paper money but a gold debt: Italy on the gold standard," Explorations in Economic History, Elsevier, Elsevier, vol. 40(2), pages 122-142, April.
    9. Bordo, Michael D. & Jonung, Lars, 1994. "Monetary Regimes, Inflation and Monetary Reform: An Essay in Honor of Axel Leijonhufvud," Working Paper Series in Economics and Finance 16, Stockholm School of Economics.
    10. Bordo, Michael D. & Jonung, Lars, 2000. "A Return to the Convertibility Principle? Monetary And Fiscal Regimes in Historical Perspective," Working Paper Series in Economics and Finance 415, Stockholm School of Economics.
    11. Reinhart, Carmen & Calvo, Guillermo, 2001. "Fixing for your life," MPRA Paper 13873, University Library of Munich, Germany.
    12. Maurice Obstfeld & Alan M. Taylor, 2002. "Globalization and Capital Markets," NBER Working Papers 8846, National Bureau of Economic Research, Inc.
    13. Eichengreen, Barry, 1990. "Trends and Cycles in Foreign Lending," CEPR Discussion Papers, C.E.P.R. Discussion Papers 451, C.E.P.R. Discussion Papers.
    14. Ricardo Hausmann & Ugo Panizza & Ernesto H. Stein, 2000. "Why Do Countries Float the Way They Float?," Research Department Publications, Inter-American Development Bank, Research Department 4205, Inter-American Development Bank, Research Department.
    15. Mohsin S. Khan & A. Senhadji Semlali, 2000. "Financial Development and Economic Growth," IMF Working Papers 00/209, International Monetary Fund.
    16. Barry Eichengreen and Marc Flandreau., 1994. "The Geography of the Gold Standard," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C94-042, University of California at Berkeley.
    17. Maurice Obstfeld, 1994. "International capital mobility in the 1990s," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 472, Board of Governors of the Federal Reserve System (U.S.).
    18. Ricardo Hausmann & Eduardo Fernández-Arias, 2000. "Foreign Direct Investment: Good Cholesterol?," Research Department Publications, Inter-American Development Bank, Research Department 4203, Inter-American Development Bank, Research Department.
    19. Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997. "Does The Nominal Exchange Rate Regime Matter?," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 97-09, New York University, Leonard N. Stern School of Business, Department of Economics.
    20. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    21. Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234 Elsevier.
    22. Milton Friedman, 1959. "The Demand for Money: Some Theoretical and Empirical Results," NBER Books, National Bureau of Economic Research, Inc, number frie59-1.
    23. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
    24. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 11(3), pages 311-25, August.
    25. Paul R. Masson, 2000. "Exchange Rate Regime Transitions," IMF Working Papers 00/134, International Monetary Fund.
    26. Angela Redish, 1993. "Anchors Aweigh: The Transition from Commodity Money to Fiat Money in Western Economies," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 26(4), pages 777-95, November.
    27. Peter L. Rousseau & Richard Sylla, 2003. "Financial Systems, Economic Growth, and Globalization," NBER Chapters, in: Globalization in Historical Perspective, pages 373-416 National Bureau of Economic Research, Inc.
    28. Lucas, Robert E., 1988. "Money demand in the United States: A quantitative review," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 29(1), pages 137-167, January.
    29. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 329-368.
    30. Eduardo Fernández-Arias & Ricardo Hausmann, 2000. "Is FDI a Safer Form of Financing?," Research Department Publications, Inter-American Development Bank, Research Department 4201, Inter-American Development Bank, Research Department.
    31. Krugman, Paul R, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(3), pages 669-82, August.
    32. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
    33. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, American Economic Association, vol. 70(3), pages 474-75, June.
    34. King, Robert G., 1988. "Money demand in the United States: A quantitative review," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 29(1), pages 169-172, January.
    35. Tesar, L.L., 1988. "Savings, Investment And International Capital Flows," Papers, Brookings Institution - Working Papers 64, Brookings Institution - Working Papers.
    36. Missale, Alessandro & Blanchard, Olivier Jean, 1994. "The Debt Burden and Debt Maturity," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 309-19, March.
    37. Drummond, Ian M., 1976. "The Russian Gold Standard, 1897–1914," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 36(03), pages 663-688, September.
    38. Eichengreen, Barry, 1997. "The Baring Crisis in a Mexican Mirror," Center for International and Development Economics Research, Working Paper Series, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkele qt81j7s02s, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    39. Barry Eichengreen & Peter Temin, 1997. "The Gold Standard and the Great Depression," NBER Working Papers 6060, National Bureau of Economic Research, Inc.
    40. Matthew T. Jones and Maurice Obstfeld., 1997. "Saving, Investment, and Gold: A Reassessment of Historical Current Account Data," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C97-094, University of California at Berkeley.
    41. repec:fth:inadeb:418 is not listed on IDEAS
    42. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
    43. Michael D. Bordo & Harold James, 2001. "The Adam Klug Memorial Lecture: Haberler versus Nurkse: The Case for Floating Exchange Rates as an Alternative to Bretton Woods?," NBER Working Papers 8545, National Bureau of Economic Research, Inc.
    44. Bordo, Michael D. & Rockoff, Hugh, 1996. "The Gold Standard as a “Good Housekeeping Seal of Approval”," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 56(02), pages 389-428, June.
    45. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications, Inter-American Development Bank, Research Department 4170, Inter-American Development Bank, Research Department.
    46. repec:fth:inadeb:416 is not listed on IDEAS
    47. Krol, Robert, 1996. "International capital mobility: evidence from panel data," Journal of International Money and Finance, Elsevier, Elsevier, vol. 15(3), pages 467-474, June.
    48. Neal,Larry, 1994. "The Rise of Financial Capitalism," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521457385.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

    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:nbr:nberch:9595. 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: ().

    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.