Pegxit Pressure: Evidence from the Classical Gold Standard

Kris James Mitchener and Goncalo Pina

No 6212, CESifo Working Paper Series from CESifo

Abstract: We develop a simple model that highlights the costs and benefits of fixed exchange rates as they relate to trade, and show that negative export-price shocks reduce fiscal revenue and increase the likelihood of an expected currency devaluation. Using a new high-frequency data set on commodity-price movements from the classical gold standard era, we then show that the model’s main prediction holds even for the canonical example of hard pegs. We identify a negative causal relationship between export-price shocks and currency-risk premia in emerging market economies, indicating that negative export-price shocks increased the probability that countries abandoned their pegs.

Keywords: currency risk; commodity prices; exchange-rate devaluation (search for similar items in EconPapers)
JEL-codes: F31 F33 F36 F41 N10 N20 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp6212.pdf (application/pdf)

Related works:
Working Paper: Pegxit Pressure: Evidence from the Classical Gold Standard (2016)
Working Paper: Pegxit Pressure: Evidence from the Classical Gold Standard (2016)
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:ces:ceswps:_6212

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().