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Exchange Rates and Casualties During the First World War

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  • George J. Hall

Abstract

I estimate two factor models of Swiss exchange rates during the FirstWorldWar. I have data for five of the primary belligerents: Britain, France, Italy, Germany, and Austria-Hungary. At the outbreak of the war, these nations suspended convertibility of their currencies into gold with the promise that after the war each would restore convertibility at the old par. However, once convertibility was suspended, the value of each currency depended on the outcome of the war. I decompose exchange rate movements into a common trend, a common factor, and country-specific factors. Movements in the common trend are consistent with the quantity theory of money. The common factor contains information on contemporaries' expectations about the war's resolution. Innovations to this common factor are correlated with time series on soldiers killed, wounded, and taken prisoner.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9261.

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Date of creation: Oct 2002
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Publication status: published as Hall, George J. "Exchange Rates And Casualties During The First World War," Journal of Monetary Economics, 2004, v51(8,Nov), 1711-1742.
Handle: RePEc:nbr:nberwo:9261

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  1. Kristen L. Willard & Timothy W. Guinnane & Harvey S. Rosen, 1995. "Turning Points in the Civil War: Views from the Greenback Market," NBER Working Papers 5381, National Bureau of Economic Research, Inc.
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  4. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
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  6. BROWN Jr., WILLIAM O. & BURDEKIN, RICHARD C. K., 2000. "Turning Points in the U.S. Civil War: A British Perspective," The Journal of Economic History, Cambridge University Press, vol. 60(01), pages 216-231, March.
  7. Bordo, Michael D. & White, Eugene N., 1991. "A Tale of Two Currencies: British and French Finance During the Napoleonic Wars," The Journal of Economic History, Cambridge University Press, vol. 51(02), pages 303-316, June.
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  11. repec:cup:jechis:v:60:y:2008:i:01:p:216-231_00 is not listed on IDEAS
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Cited by:
  1. Vincent Medina & Cyr-Denis Nidier, 2003. "Pricing war within a real option framework," Defence and Peace Economics, Taylor & Francis Journals, vol. 14(6), pages 425-435.
  2. Bryce Kanago & Ken McCormick, 2013. "The Dollar-Pound Exchange Rate During the First Nine Months of World War II," Atlantic Economic Journal, International Atlantic Economic Society, vol. 41(4), pages 385-404, December.
  3. Tobias A. Jopp, 2014. "How did the capital market evaluate Germany’s prospects for winning World War I? Evidence from the Amsterdam market for government bonds," Working Papers 0052, European Historical Economics Society (EHES).

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