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The Bank of England as the World gold market-maker during the Classical gold standard era, 1889-1910

  • Stefaano Ugolini

    ()

    (Sciences Po Toulouse and LEREPS – University of Toulouse 1 Capitole.)

This paper studies the microfoundations of the so-called “gold device” policy by analysing a new dataset on the Bank of England’s operations in the gold market at the heyday of the classical gold standard. It explains that “gold devices” must be understood in connection to the Bank’s role as gold market-maker in London and to the position of London as world gold market. Contrary to the literature, the paper shows that “gold devices” were sophisticated monetary policy tools intended to complement – not to substitute – interest rate policy and aimed at smoothing – not at hampering – international adjustment. These findings demonstrate the potential of adopting a microstructural approach to the study of monetary policy, and call for a reassessment of efficiency measurement for the gold standard.

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File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2012/WP-201215/
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Paper provided by Norges Bank in its series Working Paper with number 2012/15.

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Length: 22 pages
Date of creation: 10 Dec 2012
Date of revision:
Handle: RePEc:bno:worpap:2012_15
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  1. Gallarotti, Guilio M., 1995. "The Anatomy of an International Monetary Regime: The Classical Gold Standard 1880-1914," OUP Catalogue, Oxford University Press, number 9780195089905, December.
  2. Canjels, Eugene & Prakash-Canjels, Gauri & Taylor, Alan M., 2004. "Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard 1874-1913," CEPR Discussion Papers 4492, C.E.P.R. Discussion Papers.
  3. Hans R. Stoll, . "The Supply of Dealer Services in Securities Markets," Rodney L. White Center for Financial Research Working Papers 02-78, Wharton School Rodney L. White Center for Financial Research.
  4. Rémy Contamin, 2003. "Interdépendances financières et dilemme de politique monétaire. La Banque de France entre 1880 et 1913," Revue économique, Presses de Sciences-Po, vol. 54(1), pages 157-179.
  5. Eugene Canjels & Gauri Prakash-Canjels & Alan M. Taylor, 2004. "Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 868-882, November.
  6. Stefano Ugolini, 2012. "The origins of foreign exchange policy: the National Bank of Belgium and the quest for monetary independence in the 1850s," Post-Print hal-01293694, HAL.
  7. Biais, Bruno & Glosten, Larry & Spatt, Chester, 2004. "Market Microstructure: A Survey of Microfoundations, Empirical Results, and Policy Implications," IDEI Working Papers 253, Institut d'Économie Industrielle (IDEI), Toulouse.
  8. Oskar Morgenstern, 1959. "International Financial Transactions and Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number morg59-1, September.
  9. Perry Mehrling, 2010. "The New Lombard Street: How the Fed Became the Dealer of Last Resort," Economics Books, Princeton University Press, edition 1, number 9298, 06-2016.
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