Why did Countries Adopt the Gold Standard? Lessons from Japan

Kris James Mitchener, Masato Shizume and Marc D. Weidenmier
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Kris James Mitchener: Santa Clara University (USA), UCLA (USA) and NBER (USA)
Marc D. Weidenmier: Claremont McKenna College (USA) and NBER (USA)

No 228, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Why did policymakers adopt the gold standard? Although previous research has identified ex post effects of gold standard adoption on trade and bond yields, few studies have sought to understand whether these were the actual outcomes of interest to policymakers at the time of adoption. We examine Japan's adoption of the gold standard in 1897 to understand both the ex ante motives policymakers gave for wanting to go onto the gold standard and the ex post effects of gold standard adoption. By focusing on multiple outcome variables that were of interest to contemporaries, we are able to shed light on the political economy of the adoption of fixed exchange rates. In contrast to previous studies examining bond yields, we find little evidence that joining the gold standard reduced Japan's country risk or that it resulted in a domestic investment boom. On the other hand, we find that membership in the gold standard increased bilateral trade flows. The boost in trade appears to have been largest between Japan and its trading partners on the silver standard, suggesting that the depreciation of gold against silver from 1897-1914 increased the competitiveness of Japanese exports.

Pages: 51 pages
Date: 2008-04
New Economics Papers: this item is included in nep-his
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Citations: View citations in EconPapers (1)

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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp228.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: Why did Countries Adopt the Gold Standard? Lessons from Japan (2010)
Working Paper: Why did Countries Adopt the Gold Standard? Lessons from Japan (2009)
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