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Why did Countries Adopt the Gold Standard? Lessons from Japan

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  • Kris James Mitchener

    (Santa Clara University (USA), UCLA (USA) and NBER (USA))

  • Masato Shizume

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Marc D. Weidenmier

    (Claremont McKenna College (USA) and NBER (USA))

Abstract

Why did policymakers adopt the gold standard? Although previous research has identified ex post effects of gold standard adoption on trade and bond yields, few studies have sought to understand whether these were the actual outcomes of interest to policymakers at the time of adoption. We examine Japan's adoption of the gold standard in 1897 to understand both the ex ante motives policymakers gave for wanting to go onto the gold standard and the ex post effects of gold standard adoption. By focusing on multiple outcome variables that were of interest to contemporaries, we are able to shed light on the political economy of the adoption of fixed exchange rates. In contrast to previous studies examining bond yields, we find little evidence that joining the gold standard reduced Japan's country risk or that it resulted in a domestic investment boom. On the other hand, we find that membership in the gold standard increased bilateral trade flows. The boost in trade appears to have been largest between Japan and its trading partners on the silver standard, suggesting that the depreciation of gold against silver from 1897-1914 increased the competitiveness of Japanese exports.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp228.pdf
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 228.

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Length: 51 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:kob:dpaper:228

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  1. Lawrence J. Christiano, 1988. "Searching For a Break in GNP," NBER Working Papers 2695, National Bureau of Economic Research, Inc.
  2. Reuven Glick & Alan M. Taylor, 2010. "Collateral Damage: Trade Disruption and the Economic Impact of War," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 102-127, February.
  3. Bordo, Michael D. & Rockoff, Hugh, 1996. "The Gold Standard as a “Good Housekeeping Seal of Approval”," The Journal of Economic History, Cambridge University Press, vol. 56(02), pages 389-428, June.
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  7. J. Laurence Laughlin, 1897. "The Gold Standard in Japan," Journal of Political Economy, University of Chicago Press, vol. 5, pages 378.
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  13. Sussman, Nathan & Yafeh, Yishay, 2000. "Institutions, Reforms, and Country Risk: Lessons from Japanese Government Debt in the Meiji Era," The Journal of Economic History, Cambridge University Press, vol. 60(02), pages 442-467, June.
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Cited by:
  1. Grossman, Richard S. & Imai, Masami, 2009. "Japan's return to gold: Turning points in the value of the yen during the 1920s," Explorations in Economic History, Elsevier, vol. 46(3), pages 314-323, July.
  2. Daniela Bragoli & Camilla Ferretti & Piero Ganugi & Giancarlo Ianulardo, 2013. "Monetary regimes and statistical regularity: the Classical Gold Standard (1880-1913) through the lenses of Markov models," Discussion Papers 1301, Exeter University, Department of Economics.

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