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Contractionary Devaluation Risk: Evidence from the Free Silver Movement, 1878-1900

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  • Colin Weiss

    (Board of Governors of the Federal Reserve System)

Abstract

I identify significant effects of devaluation risk on interest rates and output using US silver coinage policy news between 1878 and 1900 as clean shocks to exchange rate expectations. The Free Silver movement heightened fears the United States would abandon the gold standard and depreciate the dollar. Because Congress, rather than a central bank, set silver coinage policy, silver policy news was likely uncorrelated with economic shocks. Corporate bonds exposed to dollar devaluation returned an additional 1 percent relative to safer bonds when silver risk decreased. Additionally, increased silver coinage risk is associated with an economically significant fall in industrial production.

Suggested Citation

  • Colin Weiss, 2020. "Contractionary Devaluation Risk: Evidence from the Free Silver Movement, 1878-1900," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 705-720, October.
    • Handle: RePEc:tpr:restat:v:102:y:2020:i:4:p:705-720
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    Cited by:

    1. Colin Weiss, 2020. "Intermediary Asset Pricing during the National Banking Era," International Finance Discussion Papers 1302, Board of Governors of the Federal Reserve System (U.S.).
    2. Niepmann, Friederike & Schmidt-Eisenlohr, Tim, 2022. "Foreign currency loans and credit risk: Evidence from U.S. banks," Journal of International Economics, Elsevier, vol. 135(C).
    3. Guillaume Bazot & Eric Monnet & Matthias Morys, 2024. "Central banks and the absorption of international shocks (1891-2019)," Working Papers halshs-04778323, HAL.
    4. Qiao, Huiquan & Liu, Fang & Zhang, Shuwen, 2025. "Market efficiency under institutional change: A historical study of the silver interbank lending market in modern China," Finance Research Letters, Elsevier, vol. 83(C).

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