This paper examines the timing of exit from the gold-exchange standard for European countriesbased on a panel of monthly observations 1928-1936 for two purposes: first it aims to understandthe enormous variation in monetary policy choices across Europe. I show that the pattern of exitfrom gold can be understood in terms of variation in factors commonly suggested in thetheoretical literature, which makes it possible to predict with reasonable accuracy the very monthwhen a country will exit gold in the 1930s. Second, I analyse the case of Poland more closelybecause it appears to be an intriguing outlier. Poland did not leave gold until April 1936 andsuffered through one of the worst examples of a depression, with massive deflation and acomplete collapse of industrial production. The estimated model fares worst for Poland, andpredicts an exit even later than April 1936. By closer inspection, the factors that drive thisprediction are the non-democratic character of the regime and a surprisingly high degree of tradeintegration with France. I argue that Poland's monetary policy was determined by attempts of thePilsudski regime to defend Poland against foreign (esp. German) aggression. I provide evidencethat strongly supports this view until about mid-1933. Ironically, just when Poland had joined thegold-bloc there were signs of a broad strategic reorientation, which paved the way for an exit in1936.
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number
dp0834.
Find related papers by JEL classification: E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy N14 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Europe: 1913-
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