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The Stability of the Interwar Gold Exchange Standard: Did Politics Matter?

  • WANDSCHNEIDER, KIRSTEN

The collapse of the inter-war gold standard has frequently been studied in economic his-tory. This paper proposes a discrete time duration model to analyze how economic and polit-ical indicators affected the length of time a country remained on the gold standard. We rely on a panel data set of 24 countries over the years 1922-1938, and incorporate new measures of political and institutional variables. The results of this study identify high per capita income growth, large foreign currency and gold reserves, trade with other countries on gold, interna-tional creditor status, and the prior experience of hyperinflation as factors that increased the probability that a country would remain on gold. In contrast, democratic regimes that were exposed to a relatively high percentage of left-wing representation in parliament left the gold standard early. We also offer predicted survival probabilities for selected key countries on the gold standard. These survival rates show that Britain abandoned the gold exchange standard at a much higher survival probability, compared with other countries in the system.

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Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 68 (2008)
Issue (Month): 01 (March)
Pages: 151-181

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Handle: RePEc:cup:jechis:v:68:y:2008:i:01:p:151-181_00
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  1. Allan Drazen, 1999. "Political Contagion in Currency Crises," NBER Working Papers 7211, National Bureau of Economic Research, Inc.
  2. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2004. "Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar Period," International Finance 0407008, EconWPA.
  3. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441, June.
  4. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661926, June.
  5. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592, June.
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