International Adjustment Under the Classical Gold Standard: Evidence for the U.S. and Britain, 1879-1914
Links between disturbances in financial markets and those in real activity have long been the focus of studies of economic fluctuations during the period prior to World War I. We emphasize that domestic autonomy was substantially limited by internationally integrated markets for goods and capital. Such findings are important for studying business cycles during the period; for example, when prices are flexible, observed cyclical movements can be related to a credit-market transmission of deflationary shocks. Recent studies of the classical gold standard have revived interest in the process by which macroeconomic shocks were transmitted internationally during this period. The principal competing approaches - the "price-specie- flow," mechanism and the more modem "internationalist" view - differ according to the means by which international equilibrium is reestablished after a disturbance occurs in capital, money, or commodity markets. We present and interpret separate pieces of evidence on gold flows, interest rates, and selected commodity prices, all of which shed light on the alternative assumptions employed in the price-specie-flow and modern approaches. We employ a monthly data set for the U.S. and Britain for the pre-World War 1 frameworks. Using the "structural VAR" approach of Bernanke and Sims, we compare the actual historical importance of shocks and the observed patterns of short-run adjustment to shocks with the prediction of each of the two models. The evidence supports the "internationalist" view of close international linkages over the "specie-flow" view of circuitous linkages and domestic autonomy in money and capital markets.
|Date of creation:||Apr 1987|
|Date of revision:|
|Publication status:||published as Bauoumi, T., B. Eichengreen and M. Taylor (eds.) Modern Perspectives on the Gold Standard. New York: Cambridge University Press, 1996.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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.:
- Miron, Jeffrey A, 1986. "Financial Panics, the Seasonality of the Nominal Interest Rate, and theFounding of the Fed," American Economic Review, American Economic Association, vol. 76(1), pages 125-40, March.
- Officer, Lawrence H, 1986. "The Efficiency of the Dollar-Sterling Gold Standard, 1890-1908," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1038-73, October.
- Garber, Peter M, 1986. "Nominal Contracts in a Bimetallic Standard," American Economic Review, American Economic Association, vol. 76(5), pages 1012-30, December.
- Bernanke, Ben S, 1981. "Bankruptcy, Liquidity, and Recession," American Economic Review, American Economic Association, vol. 71(2), pages 155-59, May.
- Ben S. Bernanke, 1983.
"Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression,"
NBER Working Papers
1054, National Bureau of Economic Research, Inc.
- Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
- J. Bradford DeLong & Lawrence H. Summers, 1986.
"The Changing Cyclical Variability of Economic Activity in the United States,"
in: The American Business Cycle: Continuity and Change, pages 679-734
National Bureau of Economic Research, Inc.
- J. Bradford De Long & Lawrence H. Summers, 1984. "The Changing Cyclical Variability of Economic Activity in the United States," NBER Working Papers 1450, National Bureau of Economic Research, Inc.
- Alan S. Blinder, 1985.
"Credit Rationing and Effective Supply Failures,"
NBER Working Papers
1619, National Bureau of Economic Research, Inc.
- Deardorff, Alan V, 1979. "One-Way Arbitrage and Its Implications for the Foreign Exchange Markets," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 351-64, April.
- Ben S. Bernanke, 1986.
"Alternative Explanations of the Money-Income Correlation,"
NBER Working Papers
1842, National Bureau of Economic Research, Inc.
- Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
- Clark, Truman A, 1986. "Interest Rate Seasonals and the Federal Reserve," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 76-125, February.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2206. 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: ()
If references are entirely missing, you can add them using this form.