The Chinese Silver Standard: Parity, Predictability, and (In)Stability, 1912–1934

Huachen Li and James Nason

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper reassesses the debate on the demise of the Chinese silver standard (CSS) in the mid-1930s. One side contends the U.S. Silver Purchase Act of June 1934 drained China of silver, which caused deflation and economic crises. Others argue the CSS collapsed because the way it operated was inherently unstable. We evaluate these claims by estimating Bayesian structural VARs with drifting parameters on new China-U.K. and China-U.S. samples from April 1912 to September 1934. Our results show that uncovered interest rate parity is seldom rejected, instability in the CSS peaked during the U.K. and U.S. recessions of the early 1920s and the Great Depression, impulse response functions are unchanged from January 1934 to September 1934, and estimates of natural rates of the CSS indicate arbitrage was expected to maintain stability of this monetary system. We argue from this evidence that neither the U.S. Silver Purchase Act of June 1934 nor a design flaw were responsible for the end of the CSS.

Keywords: China; silver standard; exchange rate; parity deviation; uncovered interest parity; natural rate; Bayesian structural VAR (search for similar items in EconPapers)
JEL-codes: E42 F31 F33 N25 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2024-10, Revised 2025-03
New Economics Papers: this item is included in nep-cna and nep-his
References: Add references at CitEc
Citations:

Downloads: (external link)
https://crawford-prod.anu.edu.au/sites/default/fil ... 025-compressed_0.pdf Revised Version (application/pdf)
https://crawford-prod.anu.edu.au/sites/default/fil ... 02024-compressed.pdf Original Version (application/pdf)

Related works:
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:een:camaaa:2024-64

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().