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Adjustment under the Classical Gold Standard (1870s-1914): How Costly did the External Constraint Come to the European periphery?

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  • Matthias Morys

Abstract

Conventional wisdom has that peripheral economies had to `play by the rules of the game` under the Classical Gold Standard (1870s-1914), while core countries could get away with frequent violations. Drawing on the experience of three core economies (England, France, Germany) and seven peripheral economies (Austria-Hungary, Bulgaria, Greece, Italy, Norway, Serbia, Sweden), my paper argues for a more nuanced perspective on the European periphery. While the conventional view might be true for some countries - most notably the Balkan countries - our findings, based on a VAR model and impulse response functions, suggest that the average gold drain that a specific peripheral economy was exposed to differed substantially from country to country. We also show that some of the peripheral economies, most notably Austria-Hungary, always enjoyed enough pulling power via discount rate policy to reverse quickly any such gold outflow. In sum, while the experience of some peripheral economies under gold was poor and hence normally short-lived, the experience of other peripheral countries resembled more those of the core economies.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 353.

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Date of creation: 01 Sep 2007
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Handle: RePEc:oxf:wpaper:353

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  1. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
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Cited by:
  1. Filippo Cesarano & Giulio Cifarelli & Gianni Toniolo, 2009. "Exchange Rate Regimes and Reserve Policy on the Periphery: The Italian Lira 1883-1911," Working Papers - Economics wp2009_11.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  2. Filippo Cesarano & Giulio Cifarelli & Gianni Toniolo, 2012. "Exchange Rate Regimes and Reserve Policy: The Italian Lira, 1883–1911," Open Economies Review, Springer, vol. 23(2), pages 253-275, April.
  3. Coşkun Tunçer, 2012. "Monetary sovereignty during the classical gold standard era: the Ottoman Empire and Europe, 1880-1913," Economic History Working Papers 44725, London School of Economics and Political Science, Department of Economic History.

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