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Exchange rate crises with domestic bank runs: Evidence from the 1890S

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Abstract

Le Sherman Silver Purchase Act de 1890 a causé des craintes d'inflation et une série d'attaques sur les réserves du Trésor Américain. Malgré ces attaques, le dollar s'est maintenu durant cette période. On peut se demander pourquoi. Un argument (Fels (1959)) est que les spéculateurs rationnels ne doutaient pas vraiment que le Trésor s'était engagé envers l'étalon-or. Un autre argument, proposé par Grilli (1990), est que la capacité du Trésor à emprunter a permis au dollar de se maintenir. Ce papier offre une troisième explication. Ici, on propose que l'étalon-or a survécu pendant l'automne 1893 parce qu'une attaque contre le système bancaire a frustré l'attaque contre le dollar. The Sherman Silver Purchase Act of 1890 led to inflation fears and a series of attacks on the United States Treasury's gold reserves. In spite of these runs, the dollar never devalued during the time. The question remains: why? One argument (Fels (1959)) is that rational speculators dis not really distrust the United States commitment to the gold standard. Another argument proposed by Grilli (1990) is that the Treasury's ability to borrow prevented collapse. This paper offers a third explanation which complements the second. It is argued that the gold standard endured in the fall of 1893 because an internal drain of commercial bank funds stopped and/or prevented the external drain on the central bank's gold tranche.

Suggested Citation

  • Victoria Miller, 1993. "Exchange rate crises with domestic bank runs: Evidence from the 1890S," Cahiers de recherche du Département des sciences économiques, UQAM 9315, Université du Québec à Montréal, Département des sciences économiques.
  • Handle: RePEc:cre:uqamwp:9315 Note: To receive copy, email author
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    References listed on IDEAS

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    1. Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 219-255.
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    3. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, pages 421-430.
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    Cited by:

    1. Hoag, Christopher, 2005. "Deposit drains on "interest-paying" banks before financial crises," Explorations in Economic History, Elsevier, vol. 42(4), pages 567-585, October.
    2. Bordo, Michael D. & Schwartz, Anna J., 2000. "Measuring real economic effects of bailouts: historical perspectives on how countries in financial distress have fared with and without bailouts," Carnegie-Rochester Conference Series on Public Policy, Elsevier, pages 81-167.
    3. Tsang, Shu-ki & Ma, Yue, 2002. "Currency substitution and speculative attacks on a currency board system," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 53-78, February.
    4. Miller, V., 1998. "Domestic bank runs and speculative attacks on foreign currencies," Journal of International Money and Finance, Elsevier, vol. 17(2), pages 331-338, April.
    5. Miller, Victoria, 2000. "Central bank reactions to banking crises in fixed exchange rate regimes," Journal of Development Economics, Elsevier, pages 451-472.
    6. Bordo, Michael D. & Schwartz, Anna J., 2000. "Measuring real economic effects of bailouts: historical perspectives on how countries in financial distress have fared with and without bailouts," Carnegie-Rochester Conference Series on Public Policy, Elsevier, pages 81-167.
    7. Francois R. Velde, 2002. "Following the yellow brick road: how the United States adopted the gold standard," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 42-58.
    8. Nancy Marion, 1999. "Some Parallels Between Currency and Banking Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 473-490, November.
    9. Heike Joebges, 2000. "Ursachen für die Häufung von "Zwillingskrisen" in Schwellenländern," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 69(1), pages 38-52.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • G2 - Financial Economics - - Financial Institutions and Services

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