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International Reserves Crises, Monetary Integration and the Payments System during the International Gold Standard


  • Paula Hernandez-Verme

    () (Department of Economics and Finance, Universidad de Guanajuato)


I model an international payments system with a financial center and periphery to reproduce various aspects of the International Gold Standard. This period was characterized by frequent crises associated with scarce stocks of reserves, high short-term interest rates with subsequent gold inflows and transmission of output contractions across countries. I find that a common international currency and no legal restrictions on exchange help the periphery share reserves with the financial center, improving the world’s welfare and mitigating output losses due to reserve crises. Also, the center has incentives for restrictive rediscounting while the periphery has motives for developing central banking.

Suggested Citation

  • Paula Hernandez-Verme, 2009. "International Reserves Crises, Monetary Integration and the Payments System during the International Gold Standard," Department of Economics and Finance Working Papers EC200904, Universidad de Guanajuato, Department of Economics and Finance.
  • Handle: RePEc:gua:wpaper:ec200904

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    References listed on IDEAS

    1. David A. Martin, 1968. "Bimetallism in the United States before 1850," Journal of Political Economy, University of Chicago Press, vol. 76, pages 428-428.
    2. Freeman, Scott, 1996. "Clearinghouse banks and banknote over-issue," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 101-115, August.
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    4. Freeman, Scott, 1999. "Rediscounting under aggregate risk," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 197-216, February.
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    8. Scott Freeman, 2002. "Payments and Output," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 602-617, July.
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    10. N/A, 1996. "Note:," Foreign Trade Review, , vol. 31(1-2), pages 1-1, January.
    11. Michael D. Bordo & Anna J. Schwartz, 1984. "A Retrospective on the Classical Gold Standard, 1821-1931," NBER Books, National Bureau of Economic Research, Inc, number bord84-1, January.
    12. Timberlake, Richard H., 1961. "The Specie Standard and Central Banking in the United States Before 1860," The Journal of Economic History, Cambridge University Press, vol. 21(03), pages 318-341, September.
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    More about this item


    International Gold Standard; International payments systems; International reserve crises; Monetary integration;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions


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