Interest rate interactions in the classical gold standard, 1880-1914

Was there any monetary independence?

Michael Bordo, Ronald MacDonald

Research output: Contribution to journalArticle

24 Citations (Scopus)

Abstract

This paper examines an hypothesis of Svensson (1994) (Journal of Monetary Economics 33, 157-199) that a credible target zone can confer on a country a degree of independence in the operation of its monetary policy, even when exchange rates are fixed. We test this hypothesis for the Classical gold standard using a newly created monthly data base for the period 1880-1913. Building on the recently noted finding that the Classical gold standard represented a credible, well-behaved, target zone system we propose a number of ways of testing the Svensson' model. Our main finding is that the Classical gold standard did indeed confer some independence in the operation of monetary policy for participating countries. This would seem to have an important bearing on the kind of institutional framework required for a modern day target zone to function effectively and, in particular, to weather speculative attacks.

Original languageEnglish (US)
Pages (from-to)307-327
Number of pages21
JournalJournal of Monetary Economics
Volume52
Issue number2
DOIs
StatePublished - Mar 1 2005

Fingerprint

Interest rates
Gold standard
Interaction
Monetary independence
Target zones
Monetary policy
Institutional framework
Speculative attacks
Weather
Monetary economics
Hypothesis test
Data base
Exchange rates
Testing

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Finance

Keywords

  • Monetary independence
  • Target zone

Cite this

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abstract = "This paper examines an hypothesis of Svensson (1994) (Journal of Monetary Economics 33, 157-199) that a credible target zone can confer on a country a degree of independence in the operation of its monetary policy, even when exchange rates are fixed. We test this hypothesis for the Classical gold standard using a newly created monthly data base for the period 1880-1913. Building on the recently noted finding that the Classical gold standard represented a credible, well-behaved, target zone system we propose a number of ways of testing the Svensson' model. Our main finding is that the Classical gold standard did indeed confer some independence in the operation of monetary policy for participating countries. This would seem to have an important bearing on the kind of institutional framework required for a modern day target zone to function effectively and, in particular, to weather speculative attacks.",
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Interest rate interactions in the classical gold standard, 1880-1914 : Was there any monetary independence? / Bordo, Michael; MacDonald, Ronald.

In: Journal of Monetary Economics, Vol. 52, No. 2, 01.03.2005, p. 307-327.

Research output: Contribution to journalArticle

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