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Sovereign Risk In The Classical Gold Standard Era

  • Gavin Cameron
  • Prasanna Gai


  • Kang Yong Tan

This paper explores the determinants of sovereign bond yields during the classical gold standard period (1872-1913). Using the Pooled Mean Group methodology, we find that the main benefit of the gold standard was as a short-sighted device that enhanced a country's reputation in international capital markets. By conveying important information to investots and enhancing the speed of adjustment of sovereign bond spreads to long-run equilibrium levels, the gold standard allowed country risk to be priced more effectively. In contrast to other studies, our results suggest that fundamental factors were more important in determining a country's creditworthiness in the long-run than the exchange rate regime per se.

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Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2006-11.

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Length: 43 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:een:camaaa:2006-11
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