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Reserves, Money Supply and Prices: The International Adjustment Mechanism in Sweden under the Silver and Gold Standards, 1834 – 1913

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  • Ögren, Anders

    () (Institute for Research in Economic History)

Abstract

This paper explores how international capital movements affected the domestic money supply. This requires that the causality at work in the adjustment process be analyzed. For this purpose, series of central bank reserves, the monetary base, the money supply and the balance of payments were constructed. The methodological problems encountered in estimating such monetary measures in a transitional economy where much of the circulating money consists of private banks notes, and which is dependent on foreign loans, is discussed. The relationship between central bank (Riksbank) reserves and international capital flows is then studied. The overall growth of the money supply, while not accompanied by a growth in reserves, is found to correspond to such growth in other countries operating under a specie standard. This growth also was related to the growth of the real economy. Qualitative evidence aside, statistical results indicate a relationship among reserves, the money supply and prices that is consistent with the price specie flow mechanism. Changes in reserves were positively related to the money supply and changes in the money supply had a lagged positive effect on changes in the level of consumer prices.

Suggested Citation

  • Ögren, Anders, 2003. "Reserves, Money Supply and Prices: The International Adjustment Mechanism in Sweden under the Silver and Gold Standards, 1834 – 1913," SSE/EFI Working Paper Series in Economics and Finance 544, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0544
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    Keywords

    Balance of Payments; Central Bank Reserves; Classical Silver and Gold Standards; Monetary Base; Money Supply; Prices;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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