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Victory or Repudiation? The Probability of the Southern Confederacy Winning the Civil War

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Author Info
Marc D. Weidenmier
Kim Oosterlinck

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Abstract

Historians have long wondered whether the Southern Confederacy had a realistic chance at winning the American Civil War. We provide some quantitative evidence on this question by introducing a new methodology for estimating the probability of winning a civil war or revolution based on decisions in financial markets. Using a unique dataset of Confederate gold bonds in Amsterdam, we apply this methodology to estimate the probability of a Southern victory from the summer of 1863 until the end of the war. Our results suggest that European investors gave the Confederacy approximately a 42 percent chance of victory prior to the battle of Gettysburg/Vicksburg. News of the severity of the two rebel defeats led to a sell-off in Confederate bonds. By the end of 1863, the probability of a Southern victory fell to about 15 percent. Confederate victory prospects generally decreased for the remainder of the war. The analysis also suggests that McClellan's possible election as U.S. President on a peace party platform as well as Confederate military victories in 1864 did little to reverse the market's assessment that the South would probably lose the Civil War.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13567.

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Date of creation: Nov 2007
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Handle: RePEc:nbr:nberwo:13567

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N2 - Economic History - - Financial Markets and Institutions
N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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  1. Marc D. Weidenmier, . "Turning Points during the U.S. Civil War: Views from the Grayback Market," Claremont Colleges Working Papers 1999-24, Claremont Colleges. [Downloadable!]
  2. Cumby, Robert & Pastine, Tuvana, 2001. "Emerging Market Debt: Measuring Credit Quality and Examining Relative Pricing," CEPR Discussion Papers 2866, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Weidenmier, Marc D., 2000. "The Market for Confederate Cotton Bonds," Explorations in Economic History, Elsevier, vol. 37(1), pages 76-97, January. [Downloadable!] (restricted)
  4. Kim Oosterlinck & Loredana Ureche-Rangau, 2004. "Entre la peste et le choléra Le détenteur d’obligations peut préférer la répudiation au défaut…," Working Papers CEB 04-021.RS, Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB). [Downloadable!]
  5. Marc D. Weidenmier, . "The Market for Confederate Cotton Bonds," Claremont Colleges Working Papers 1999-12, Claremont Colleges.
  6. Bordo Michael D. & Kydland Finn E., 1995. "The Gold Standard As a Rule: An Essay in Exploration," Explorations in Economic History, Elsevier, vol. 32(4), pages 423-464, October. [Downloadable!] (restricted)
  7. Irwin, Douglas A., 2003. "The optimal tax on antebellum US cotton exports," Journal of International Economics, Elsevier, vol. 60(2), pages 275-291, August. [Downloadable!] (restricted)
  8. Richard C. K. Burdekin & Marc D. Weidenmier, 2001. "Inflation Is Always and Everywhere a Monetary Phenomenon: Richmond vs. Houston in 1864," American Economic Review, American Economic Association, vol. 91(5), pages 1621-1630, December. [Downloadable!] (restricted)
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  9. Willard, Kristen L & Guinnane, Timothy W & Rosen, Harvey S, 1996. "Turning Points in the Civil War: Views from the Greenback Market," American Economic Review, American Economic Association, vol. 86(4), pages 1001-18, September. [Downloadable!] (restricted)
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  10. William O. Brown, Jr. & Richard C.K. Burdekin, . "Turning Points in the U.S. Civil War: A British Perspective," Claremont Colleges Working Papers 1999-29, Claremont Colleges. [Downloadable!]
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