The power of peripheral governments: coping with the 1891 financial crisis in Portugal
AbstractIn 1891 a financial crisis led Portugal to abandon the gold standard and to partially default by cutting interest payments on domestic and foreign debt. As a consequence, the country was banned from borrowing in international financial markets, until an agreement with foreign bondholders was reached in 1902. That financial crisis was the result of large current account and government deficits. Yet the abandonment of the gold standard and default were not imposed by financial difficulties only. This paper shows that such options were taken because of the growing domestic consensus regarding the need for a change in monetary policies. The concern about the domestic economy was more important to the Portuguese governments than the fear of a negative reaction of foreign bondholders. Insufficient information about the sustainability of government debt and lack of cooperation between borrowers left the Portuguese governments with space to manoeuvre according to their domestic political interests.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Historia Económica e Instituciones in its series Working Papers in Economic History with number wp06-11.
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- Rui Pedro Esteves & Jaime Reis & Fabiano Ferramosca, 2005.
"Market Integration in the Golden Periphery - the Lisbon/London Exchange, 1854-1891,"
w200515, Banco de Portugal, Economics and Research Department.
- Esteves, Rui Pedro & Reis, Jaime & Ferramosca, Fabiano, 2009. "Market Integration in the Golden Periphery. The Lisbon/London Exchange, 1854-1891," Explorations in Economic History, Elsevier, vol. 46(3), pages 324-345, July.
- Rui Esteves & Jaime Reis, 2007. "Market Integration in the Golden Periphery,The Lisbon/London Exchange, 1854-1891," Economics Series Working Papers 338, University of Oxford, Department of Economics.
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