The restoration of the gold standard after the US Civil War: A volatility analysis

Max Meulemann, Martin Uebele and Bernd Wilfling

Journal of Financial Stability, 2014, vol. 12, issue C, 37-46

Abstract: This paper presents a new view on the gold price of greenbacks during and after the American Civil War by analyzing exchange-rate volatility rather than exchange-rate levels. Our empirical investigation detects regimes of high and low volatility alternating in a way that is consistent with a theoretical exchange-rate model in which the rate is primarily driven by investors’ expectations and not by fundamentals. We interpret these findings as evidence that monetary policy makers were surprisingly able to credibly announce the resumption to gold half a year before it actually took place on January 1, 1879. Given the intense political debate about the appropriate design of the United States’ financial system, this is a remarkable result. It indicates that the policy makers’ ability to anchor investors’ expectations is relevant to achieving asset-price stability as well as effectiveness of financial market regulation. The insights from this historical episode should therefore be of interest to policy makers and regulators combating financial crises like the ongoing current debt crises worldwide.

Keywords: Monetary history; 19th century; USA; Greenback; Markov-switching GARCH models (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572308913000405
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Restoration of the Gold Standard after the US Civil War: A Volatility Analysis (2012)
Working Paper: The Restoration of the Gold Standard after the US Civil War: A Volatility Analysis (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:12:y:2014:i:c:p:37-46

DOI: 10.1016/j.jfs.2013.05.001

Access Statistics for this article

Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu ().