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

Maurice Obstfeld and Alan Taylor

No 3688, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: What determines sovereign risk? We study the London bond market from the 1870s to the 1930s. Our findings support conventional wisdom concerning the limited credibility of the interwar gold standard. Before 1914, gold standard adherence effectively signalled credibility and shaved 40 to 60 basis points from country borrowing spreads. In the 1920s, however, simply resuming prewar gold parities was insufficient to secure such benefits. Countries that devalued before resumption were treated favourably, 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)
JEL-codes: F20 F33 F36 F41 N10 N20 (search for similar items in EconPapers)
Date: 2003-01
New Economics Papers: this item is included in nep-ifn and nep-rmg
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Citations: View citations in EconPapers (83)

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Related works:
Journal Article: 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 (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)
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