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New paradigms and old promises: central banks and the market for sovereign debt in the interwar period

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  • Flores Zendejas, Juan
  • Lopez Soto, David
  • Sanchez Amador, David

Abstract

This paper analyses the motives behind the establishment of central banks during the interwar period. We argue that most governments with difficulties in accessing financial markets established central banks, as this was a general recommendation provided by contemporary money doctors. However, even if central banks served to facilitate the issue of foreign loans on the New York financial market, we find that governments with central banks did not obtain more favorable terms for those loans. Our analysis further demonstrates that investors concentrated on macroeconomic achievements such as inflation and monetary stability, and whether a lender-of-last resort facility existed, regardless of whether or not this was pursued by a central bank.

Suggested Citation

  • Flores Zendejas, Juan & Lopez Soto, David & Sanchez Amador, David, 2020. "New paradigms and old promises: central banks and the market for sovereign debt in the interwar period," Working Papers unige:129346, University of Geneva, Paul Bairoch Institute of Economic History.
    • Handle: RePEc:gnv:wpaper:unige:129346
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    References listed on IDEAS

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    2. Juan H. Flores Zendejas & Yann Decorzant, 2016. "Going multilateral? Financial markets' access and the League of Nations loans, 1923–8," Economic History Review, Economic History Society, vol. 69(2), pages 653-678, May.
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    Keywords

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    JEL classification:

    • N00 - Economic History - - General - - - General
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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