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Exchange Market Pressure on the Pound-Dollar Exchange Rate: 1925-1931

Author

Listed:
  • C. Paul Hallwood

    (University of Connecticut)

  • Ian W. Marsh

    (Cass Business School, London, and CEPR)

Abstract

An investigation of exchange market pressure against the pound sterling during the inter-war period. The main findings are that a) the behavior of UK fundamentals relative to those of the USA help to explain exchange market pressure against the pound; b) during the run up to devaluation in September 1931 the monetary authorities in the UK were acting to reduce domestic credit; but that c) additional pressure was brought against the pound from speculative sources. These findings relate to current thinking on the choice of exchange rate regime as even well behaved fundamentals may not be sufficient to sustain a currency on its peg.

Suggested Citation

  • C. Paul Hallwood & Ian W. Marsh, 2003. "Exchange Market Pressure on the Pound-Dollar Exchange Rate: 1925-1931," Working papers 2003-23, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2003-23
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    References listed on IDEAS

    as
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    3. Mizrach, Bruce, 1995. "Target zone models with stochastic realignments: an econometric evaluation," Journal of International Money and Finance, Elsevier, pages 641-657.
    4. Giuseppe Bertola & Lars E. O. Svensson, 1993. "Stochastic Devaluation Risk and the Empirical Fit of Target-Zone Models," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 689-712.
    5. Weymark, Diana N., 1995. "Estimating exchange market pressure and the degree of exchange market intervention for Canada," Journal of International Economics, Elsevier, pages 273-295.
    6. Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, pages 13-47.
    7. Officer Lawrence H., 1993. "Gold-Point Arbitrage and Uncovered Interest Arbitrage under the 1925-1931 Dollar-Sterling Gold Standard," Explorations in Economic History, Elsevier, vol. 30(1), pages 98-127, January.
    8. Paul Hallwood, C. & MacDonald, Ronald & Marsh, Ian W., 2000. "Realignment expectations and the US dollar, 1890-1897: Was there a 'Peso problem'?," Journal of Monetary Economics, Elsevier, vol. 46(3), pages 605-620, December.
    9. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, pages 537-548.
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    Cited by:

    1. Augustine A. Boakye & Hassan Molana, 2007. "Fluctuation in the International Currency Reserves of Less Developed Countries: HIPC vs Non-HIPC," Dundee Discussion Papers in Economics 203, Economic Studies, University of Dundee.
    2. Dur, Robert & Roelfsema, Hein, 2010. "Social exchange and common agency in organizations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(1), pages 55-63, January.

    More about this item

    Keywords

    Bank of England; exchange market pressure; gold standard; devaluation; pegged exchange rates; realignment expectations.;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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