 The effects of countercyclical interest rates: Evidence from the classical gold standardKris James Mitchener and Goncalo Pina Journal of International Economics, 2023, vol. 145, issue C Abstract: We estimate the impact of countercyclical interest rates on macroeconomic outcomes in open economies. To identify countercyclical interest rates, we construct a new database of short-term interest rates, principal exports, and commodity prices for 40 economies from 1870–1913. Specialization and trade integration subjected economies to a “commodity lottery” in the form of price fluctuations in world markets. Capital mobility and a currency peg exposed them to interest-rate movements originating in the U.K., the largest economy and linchpin of the classical gold standard. We use these two exogenous shocks to identify positive effects of commodity-export prices on real GDP and the domestic price level and negative effects of exogenous changes in short-term interest rates on the same variables. We show that countercyclical interest rates, defined relative to export-price shocks, stabilized both output and the domestic price level. This stabilization was more effective for the price level than for output. Keywords: Countercyclical interest rates; Nominal anchors; Stabilization; Demand shocks; Commodity lottery; Gold standard (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:145:y:2023:i:c:s0022199623001137 DOI: 10.1016/j.jinteco.2023.103827 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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