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An Exception that Proves the Rule: Japanese Monetary Policy under the Classical Gold Standard, 1897-1914

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  • Takagi, Shinji

Abstract

The paper explores Japanese monetary policy under the classical gold standard (1897-1914), while providing a succinct exposition of the distinguishing features of the Japanese gold standard regime. The paper, explaining how the Bank of Japan conducted monetary policy, finds that, as a general practice, (i) it used fiduciary issues to offset movements in monetary gold so as to stabilize the supply of currency; (ii) it moved the discount rate in the same direction as the government moved the extra issue tax rate; and (iii) it raised the discount rate in response to an increase in gold outflows. The rules-of-the-game-like behavior of discount rate policy, motivated by the central bank's mandate to preserve gold convertibility, was robust and consistent, challenging the semi-consensual view that violations of the rules were frequent and pervasive under the classical gold standard.

Suggested Citation

  • Takagi, Shinji, 2024. "An Exception that Proves the Rule: Japanese Monetary Policy under the Classical Gold Standard, 1897-1914," AGI Working Paper Series 2024-11, Asian Growth Research Institute.
    • Handle: RePEc:agi:wpaper:02000096
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    File URL: https://agi.repo.nii.ac.jp/records/2000096
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    File URL: https://agi.repo.nii.ac.jp/record/2000096/files/WP2024-11.pdf
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    References listed on IDEAS

    as
    1. Eichengreen, Barry, 1987. "Conducting the international orchestra: Bank of England leadership under the classical gold standard," Journal of International Money and Finance, Elsevier, vol. 6(1), pages 5-29, March.
    2. Davutyan, Nurhan & Parke, William R, 1995. "The Operations of the Bank of England, 1890-1908: A Dynamic Probit Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1099-1112, November.
    3. Morys, Matthias, 2013. "Discount rate policy under the Classical Gold Standard: Core versus periphery (1870s–1914)," Explorations in Economic History, Elsevier, vol. 50(2), pages 205-226.
    4. Jeanne Olivier, 1995. "Monetary Policy in England 1893-1914: A Structural VAR Analysis," Explorations in Economic History, Elsevier, vol. 32(3), pages 302-326, July.
    5. 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 725-745, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    classical gold standard; rules of the game; Japanese monetary policy; Japan under the classical gold standard; Bank of Japan discount rate policy;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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