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Sovereign Risk In The Classical Gold Standard Era

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  • Gavin Cameron
  • Prasanna Gai

    ()

  • Kang Yong Tan

Abstract

This paper explores the determinants of sovereign bond yields during the classical gold standard period (1872-1913). Using the Pooled Mean Group methodology, we find that the main benefit of the gold standard was as a short-sighted device that enhanced a country's reputation in international capital markets. By conveying important information to investots and enhancing the speed of adjustment of sovereign bond spreads to long-run equilibrium levels, the gold standard allowed country risk to be priced more effectively. In contrast to other studies, our results suggest that fundamental factors were more important in determining a country's creditworthiness in the long-run than the exchange rate regime per se.

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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2006-11.

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Length: 43 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:een:camaaa:2006-11

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Cited by:
  1. Maltritz, Dominik & Molchanov, Alexander, 2013. "Analyzing determinants of bond yield spreads with Bayesian Model Averaging," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(12), pages 5275-5284.
  2. Eichler, Stefan & Maltritz, Dominik, 2013. "The term structure of sovereign default risk in EMU member countries and its determinants," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(6), pages 1810-1816.
  3. Alfonso Arpaia & Alessandro Turrini, 2008. "Government expenditure and economic growth in the EU: long-run tendencies and short-term adjustment," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 300, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Maltritz, Dominik & Molchanov, Alexander, 2014. "Country credit risk determinants with model uncertainty," International Review of Economics & Finance, Elsevier, Elsevier, vol. 29(C), pages 224-234.

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