Sovereign Risk, Credibility and the Gold Standard: 1870-1913 versus 1925-31

Maurice Obstfeld and Alan M. Taylor ()

No 1029, Center for International and Development Economics Research, Working Paper Series from Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley

Abstract: What determines sovereign risk? We study the London bond market from the 1870s to the 1930s. Our findings support conventional wisdom concerning the low credibility of the interwar gold standard. Before 1914 gold standard adherence effectively signalled credibility and shaved up to 30 basis points from country borrowing spreads. In the 1920s, however, simply resuming prewar gold parities was insufficient to secure benefits. Countries that devalued before resumption were treated more favorably, and markets scrutinized other signals. Public debt and British Empire membership were important determinants of spreads after World War One, but not before.

Keywords: Gold standard; sovereign risk; credibility; monetary regimes; exchange rates (search for similar items in EconPapers)
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Date: 2003-01-11
Note: oai:cdlib1:iber/cider-1029
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Related works:
Working Paper: Sovereign Risk, Credibility and the Gold Standard: 1870-1913 versus 1925-31 (2003)
Working Paper: Sovereign Risk, Credibility and the Gold Standard: 1870-1913 versus 1925-31 (2003)
Working Paper: Sovereign Risk, Credibility and the Gold Standard: 1870-1913 versus 1925-31 (2002)
Journal Article: Sovereign risk, credibility and the gold standard: 1870-1913 versus 1925-31 (2003)
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