IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Interest parity conditions during the classical gold standard (1880 -1914) - Evidence from the investment demand for bills of exchange in Europe

Listed author(s):
  • Nils Herger

    (Study Center Gerzensee, Switzerland.)

Registered author(s):

    This paper examines several versions of the (covered and uncovered) interest parity condition that arguably held as regards the investment demand for bills of exchange during the classical gold standard (1880 - 1914). Contemporaneous guide books about the foreign exchanges report that close connections between the exchange and interest (or discount) rates arose mainly between London and the major financial centres on the European continent. As implied by the interest parity condition, and in particular when future exchange rate movements were covered via a suitable long-bill transaction, weekly data suggest indeed that between Paris, Amsterdam, Berlin and London, the return from discounting bills of exchange in the local money market was roughly equivalent to the (exchange rate adjusted) return from investing in foreign bills.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP1607.pdf
    Download Restriction: no

    Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 1607.

    as
    in new window

    Length:
    Date of creation: 2016
    Handle: RePEc:exe:wpaper:1607
    Contact details of provider: Postal:
    Streatham Court, Rennes Drive, Exeter EX4 4PU

    Phone: (01392) 263218
    Fax: (01392) 263242
    Web page: http://business-school.exeter.ac.uk/about/departments/economics/

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Flandreau, Marc & Jobst, Clemens, 2005. "The Ties that Divide: A Network Analysis of the International Monetary System, 1890 1910," The Journal of Economic History, Cambridge University Press, vol. 65(04), pages 977-1007, December.
    2. Flood, Robert P & Rose, Andrew K, 1996. "Fixes: Of the Forward Discount Puzzle," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 748-752, November.
    3. Flandreau, Marc & Komlos, John, 2006. "Target zones in theory and history: Credibility, efficiency, and policy autonomy," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1979-1995, November.
    4. Stefaano Ugolini, 2012. "The Bank of England as the World gold market-maker during the Classical gold standard era, 1889-1910," Working Paper 2012/15, Norges Bank.
    5. Lothian, James R. & Wu, Liuren, 2011. "Uncovered interest-rate parity over the past two centuries," Journal of International Money and Finance, Elsevier, vol. 30(3), pages 448-473, April.
    6. Taylor, Mark P, 1989. "Covered Interest Arbitrage and Market Turbulence," Economic Journal, Royal Economic Society, vol. 99(396), pages 376-391, June.
    7. Coleman, Andrew, 2012. "Uncovering uncovered interest parity during the classical gold standard era, 1888–1905," The North American Journal of Economics and Finance, Elsevier, vol. 23(1), pages 20-37.
    8. repec:spo:wpecon:info:hdl:2441/605 is not listed on IDEAS
    9. Flandreau, Marc & Jobst, Clemens, 2005. "The Ties that Divide. A Network Analysis of the International Monetary System," CEPR Discussion Papers 5129, C.E.P.R. Discussion Papers.
    10. Chinn, Menzie D., 2006. "The (partial) rehabilitation of interest rate parity in the floating rate era: Longer horizons, alternative expectations, and emerging markets," Journal of International Money and Finance, Elsevier, vol. 25(1), pages 7-21, February.
    11. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    12. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:exe:wpaper:1607. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carlos Cortinhas)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.