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Exchange Rates and Casualties During the First World War

George Hall ()

No 1321, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: I estimate a single factor model of Swiss exchange rates during World War I for five of the primary belligerents: Britain, France, Italy, Germany, and Austria-Hungary. At the outbreak of the war these nations suspended convertibility of their currencies into gold with the promise that after the war each would restore convertibility at the old par. However, once convertibility was suspended, each currency became a state-contingent claim; after the war it would pay off at (or near) the old par if the country won or pay off significantly less than par (perhaps nothing) if the country lost. The single factor extracted from the five exchange rates appears to contain information on contemporaries' expectations about the war's outcome. Innovations to the single factor are correlated with time series on soldiers killed and wounded and soldiers taken prisoner.

Keywords: First World War; factor models; principal component analysis (search for similar items in EconPapers)
JEL-codes: E40 N14 N24 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ent, nep-ifn and nep-net
Date: 2001-08
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Published in Journal of Monetary Economics (November 2004), 51(8): 1711-1742

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Journal Article: Exchange rates and casualties during the first world war (2004) Downloads
Working Paper: Exchange Rates and Casualties During the First World War (2002) Downloads
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