Exchange Rate Regimes and Reserve Policy on the Periphery: The Italian Lira 1883-1911

Filippo Cesarano (), Giulio Cifarelli () and Gianni Toniolo
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Filippo Cesarano: Banca D'Italia

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: The three exchange rate regimes adopted by Italy from 1883 up to the eve of World War I — the gold standard (1883-1893), floating rates (1894-1902), and “gold shadowing” (1903-1911) — produced a puzzling result: formal adherence to the gold standard ended in failure while shadowing the gold standard proved very successful. This paper discusses the main policies underlying Italy’s performance particularly focusing on the strategy of reserve accumulation. It presents a cointegration analysis identifying a distinct co-movement between exchange rate, reserves, and banknotes that holds over the three sub-periods of the sample. Given this long-run relationship, the different performance in each regime is explained by the diversity of policy measures, reflected in the different variables adjusting the system in the various regimes. Italy’s variegated experience during the gold standard provides a valuable lesson about current developments in the international scenario, showing the central role of fundamenals and consistent policies.

Keywords: Exchange rate; gold standard; reserve policy; cointegration (search for similar items in EconPapers)
JEL-codes: F31 F33 N13 N23 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-his, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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