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Exchange market pressure on the pound-dollar exchange rate: 1925-1931

  • Hallwood, C. Paul
  • Marsh, Ian W.

An investigation of exchange market pressure against the pound sterling during the inter-war period. The main findings are that a) the behavior of UK fundamentals relative to those of the USA help to explain exchange market pressure against the pound; b) during the run up to devaluation in September 1931 the monetary authorities in the UK were acting to reduce domestic credit; but that c) additional pressure was brought against the pound from speculative sources. These findings relate to current thinking on the choice of exchange rate regime as even well behaved fundamentals may not be sufficient to sustain a currency on its peg.

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Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 15 (2004)
Issue (Month): 2 (August)
Pages: 249-264

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Handle: RePEc:eee:ecofin:v:15:y:2004:i:2:p:249-264
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620163

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  1. Officer Lawrence H., 1993. "Gold-Point Arbitrage and Uncovered Interest Arbitrage under the 1925-1931 Dollar-Sterling Gold Standard," Explorations in Economic History, Elsevier, vol. 30(1), pages 98-127, January.
  2. Weymark, Diana N, 1998. "A General Approach to Measuring Exchange Market Pressure," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 106-21, January.
  3. Peel, David A & Taylor, Mark P, 2002. "Covered Interest Rate Arbitrage in the Interwar Period and the Keynes-Einzig Conjecture," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 51-75, February.
  4. Giuseppe Bertola & Lars E.O. Svensson, 1991. "Stochastic Devaluation Risk and the Empirical Fit of Target Zone Models," NBER Working Papers 3576, National Bureau of Economic Research, Inc.
  5. Svensson, Lars E O, 1991. "The Simplest Test of Target Zone Credibility," CEPR Discussion Papers 493, C.E.P.R. Discussion Papers.
  6. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, vol. 67(4), pages 537-48, September.
  7. Lars E.O. Svensson, 1991. "Assessing Target Zone Credibility: Mean Reversion and Devaluation Expectations in the ERM 1979-1992," NBER Working Papers 3795, National Bureau of Economic Research, Inc.
  8. Mizrach, Bruce, 1995. "Target zone models with stochastic realignments: an econometric evaluation," Journal of International Money and Finance, Elsevier, vol. 14(5), pages 641-657, October.
  9. Paul Hallwood, C. & MacDonald, Ronald & Marsh, Ian W., 2000. "Realignment expectations and the US dollar, 1890-1897: Was there a 'Peso problem'?," Journal of Monetary Economics, Elsevier, vol. 46(3), pages 605-620, December.
  10. Milton Friedman & Anna Jacobson Schwartz, 1970. "Monetary Statistics of the United States: Estimates, Sources, Methods," NBER Books, National Bureau of Economic Research, Inc, number frie70-1, June.
  11. Marcus Miller & Paul Weller, 1991. "Currency Bands, Target Zones, and Price Flexibility," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 184-215, March.
  12. Evan Tanner, 1999. "Exchange Market Pressure and Monetary Policy; Asia and Latin America in the 1990's," IMF Working Papers 99/114, International Monetary Fund.
  13. Eichengreen, Barry & Watson, Mark W & Grossman, Richard S, 1985. "Bank Rate Policy under the Interwar Gold Standard: A Dynamic Probit Model," Economic Journal, Royal Economic Society, vol. 95(379), pages 725-45, September.
  14. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
  15. Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
  16. Darvas, Zsolt, 1998. "Spurious Correlation in Exchange Rate Target Zone Modelling: Testing the Drift Adjustment Method on the US Dollar, Random Walk and Chaos," CEPR Discussion Papers 1890, C.E.P.R. Discussion Papers.
  17. Weymark, Diana N., 1995. "Estimating exchange market pressure and the degree of exchange market intervention for Canada," Journal of International Economics, Elsevier, vol. 39(3-4), pages 273-295, November.
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