Reserves, Money Supply and Prices: The International Adjustment Mechanism in Sweden under the Silver and Gold Standards, 1834 – 1913

Anders Ögren

No 544, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: This paper explores how international capital movements affected the domestic money supply. This requires that the causality at work in the adjustment process be analyzed. For this purpose, series of central bank reserves, the monetary base, the money supply and the balance of payments were constructed. The methodological problems encountered in estimating such monetary measures in a transitional economy where much of the circulating money consists of private banks notes, and which is dependent on foreign loans, is discussed. The relationship between central bank (Riksbank) reserves and international capital flows is then studied. The overall growth of the money supply, while not accompanied by a growth in reserves, is found to correspond to such growth in other countries operating under a specie standard. This growth also was related to the growth of the real economy. Qualitative evidence aside, statistical results indicate a relationship among reserves, the money supply and prices that is consistent with the price specie flow mechanism. Changes in reserves were positively related to the money supply and changes in the money supply had a lagged positive effect on changes in the level of consumer prices.

Keywords: Balance of Payments; Central Bank Reserves; Classical Silver and Gold Standards; Monetary Base; Money Supply; Prices (search for similar items in EconPapers)
JEL-codes: E31 E51 N13 N23 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2003-11-05
New Economics Papers: this item is included in nep-his, nep-ifn, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0544

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