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Were there Anomalies in the Sterling-Franc Exchange Rate Regulation during the Mid-19th Century?

  • Claude Diebolt

    ()

    (Association Française de Cliométrie (AFC), BETA/CNRS, Université Louis Pasteur de Strasbourg & Humboldt-Universität zu Berlin.)

  • Antoine Parent

    ()

    (Association Française de Cliométrie (AFC), BETA/CNRS, UMR 7522, Université Louis Pasteur de Strasbourg.)

In this paper, we test whether French and British central banks discount rates were an efficient tool for currency stabilisation over the 1850-1870 period. Causality and impulse analysis as well as outlier methodology are carried out in order to test this proposition. We give strong evidence that the discount rate differential between France and England had a crucial corrective influence on the Sterling-Franc spot exchange rate. Regarding this exchange rate regulation hypothesis, we find only one single anomaly which occurred in February 1861. The assessment of the historical context helps to understand this peculiar event. We conclude to the absence of anomalies in the Sterling-Franc exchange rate regulation over the 1850-1870 period.

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Paper provided by Association Française de Cliométrie (AFC) in its series Working Papers with number 06-08.

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Length: 19 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:afc:wpaper:06-08
Contact details of provider: Web page: http://www.cliometrie.org

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