The Russian Balance of Payments, the Gold Standard, and Monetary Policy: A Historical Example of Foreign Capital Movements

Paul R. Gregory

The Journal of Economic History, 1979, vol. 39, issue 2, 379-400

Abstract: This paper reports new calculations of foreign investment in Russia between 1881 and 1913. As the major recipient of foreign capital under the gold standard, Russia provides an ideal case study of capital flows among countries. The conclusions are that the influx of foreign investment into Russia following convertibility was much more substantial than the early estimates suggested and that the Russian growth rate was raised by about 0.5 percent annually as a consequence of the gold standard. The major cost of achieving convertibility was that two-thirds of official borrowing abroad between 1885 and 1897 was used to acquire gold reserves, but the ensuing growth benefits which are estimated far outweigh these costs. The Russian case confirms the standard portfolio theory of capital movements, and the relationship between the demand and supply of fiat money explains observed variations in the exchange rate.

Date: 1979
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