Reserves, Money Supply and Prices: The International Adjustment Mechanism in Sweden under the Silver and Gold Standards, 1834 – 1913
AbstractThis paper explores how international capital movements affected the domestic money supply. This requires that the causality at work in the adjustment process be analyzed. For this purpose, series of central bank reserves, the monetary base, the money supply and the balance of payments were constructed. The methodological problems encountered in estimating such monetary measures in a transitional economy where much of the circulating money consists of private banks notes, and which is dependent on foreign loans, is discussed. The relationship between central bank (Riksbank) reserves and international capital flows is then studied. The overall growth of the money supply, while not accompanied by a growth in reserves, is found to correspond to such growth in other countries operating under a specie standard. This growth also was related to the growth of the real economy. Qualitative evidence aside, statistical results indicate a relationship among reserves, the money supply and prices that is consistent with the price specie flow mechanism. Changes in reserves were positively related to the money supply and changes in the money supply had a lagged positive effect on changes in the level of consumer prices.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 544.
Length: 49 pages
Date of creation: 05 Nov 2003
Date of revision:
Contact details of provider:
Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
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Web page: http://www.hhs.se/
More information through EDIRC
Balance of Payments; Central Bank Reserves; Classical Silver and Gold Standards; Monetary Base; Money Supply; Prices;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-09 (All new papers)
- NEP-HIS-2003-11-09 (Business, Economic & Financial History)
- NEP-IFN-2003-11-09 (International Finance)
- NEP-MAC-2003-11-09 (Macroeconomics)
- NEP-MON-2003-11-09 (Monetary Economics)
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