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Why did Countries Adopt the Gold Standard? Lessons from Japan

Author

Listed:
  • Kris James Mitchener

    (Santa Clara University (USA), UCLA (USA) and NBER (USA))

  • Masato Shizume

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Marc D. Weidenmier

    (Claremont McKenna College (USA) and NBER (USA))

Abstract

Why did policymakers adopt the gold standard? Although previous research has identified ex post effects of gold standard adoption on trade and bond yields, few studies have sought to understand whether these were the actual outcomes of interest to policymakers at the time of adoption. We examine Japan's adoption of the gold standard in 1897 to understand both the ex ante motives policymakers gave for wanting to go onto the gold standard and the ex post effects of gold standard adoption. By focusing on multiple outcome variables that were of interest to contemporaries, we are able to shed light on the political economy of the adoption of fixed exchange rates. In contrast to previous studies examining bond yields, we find little evidence that joining the gold standard reduced Japan's country risk or that it resulted in a domestic investment boom. On the other hand, we find that membership in the gold standard increased bilateral trade flows. The boost in trade appears to have been largest between Japan and its trading partners on the silver standard, suggesting that the depreciation of gold against silver from 1897-1914 increased the competitiveness of Japanese exports.

Suggested Citation

  • Kris James Mitchener & Masato Shizume & Marc D. Weidenmier, 2008. "Why did Countries Adopt the Gold Standard? Lessons from Japan," Discussion Paper Series 228, Research Institute for Economics & Business Administration, Kobe University.
  • Handle: RePEc:kob:dpaper:228
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    References listed on IDEAS

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    Cited by:

    1. Kris James Mitchener & Gonçalo Pina, 2016. "Pegxit Pressure: Evidence from the Classical Gold Standard," NBER Working Papers 22844, National Bureau of Economic Research, Inc.
    2. Daniela Bragoli & Camilla Ferretti & Piero Ganugi & Giancarlo Ianulardo, 2013. "Monetary regimes and statistical regularity: the Classical Gold Standard (1880-1913) through the lenses of Markov models," Discussion Papers 1301, Exeter University, Department of Economics.
    3. Tang, John P., 2015. "The Engine And The Reaper: Industrialization And Mortality In Early Modern Japan," RCESR Discussion Paper Series DP15-10, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    4. Grossman, Richard S. & Imai, Masami, 2009. "Japan's return to gold: Turning points in the value of the yen during the 1920s," Explorations in Economic History, Elsevier, vol. 46(3), pages 314-323, July.
    5. William Miles & Chu-Ping C. Vijverberg, 2014. "Did the Classical Gold Standard Lead to Greater Business Cycle Synchronization? Evidence from New Measures," Kyklos, Wiley Blackwell, vol. 67(1), pages 93-115, February.
    6. William Miles, 2015. "Did the Classical Gold Standard Lead to Greater Price Level Convergence? A New Approach," Open Economies Review, Springer, vol. 26(2), pages 351-377, April.
    7. Mitchener, Kris James & Weidenmier, Marc, 2015. "Was the Classical Gold Standard Credible on the Periphery? Evidence from Currency Risk," CEPR Discussion Papers 10388, C.E.P.R. Discussion Papers.
    8. Pittaluga, Giovanni B. & Seghezza, Elena, 2016. "How Japan remained on the Gold Standard despite unsustainable external debt," Explorations in Economic History, Elsevier, vol. 59(C), pages 40-54.
    9. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093.

    More about this item

    JEL classification:

    • 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
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East

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