The Inter-War Gold Exchange Standard: Credibility and Monetary Independence
Michael Bordo () and
Ronald MacDonald ()
No 8429, NBER Working Papers from National Bureau of Economic Research, Inc
In this paper we analyze the operation of the inter-war gold exchange standard to see if the evident credibility of the system conferred on participating central banks the ability to pursue independent monetary policies. To answer this question we econometrically analyze two key parity, or arbitrage, conditions, namely uncovered interest rate parity and a yield gap relationship. We find that there were both long- and short-run deviations from the arbitrage conditions. The use to which this policy independence was put is analyzed in the context of a multivariate system, which includes reaction function variables.
JEL-codes: F31 G15 (search for similar items in EconPapers)
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Published as Bordo, Michael D. and Ronald MacDonald. "Interest Rate Interactions In The Classical Gold Standard, 1880-1914: Was There Any Monetary Independence?," Journal of Monetary Economics, March 2005, v52(2): 307-327
Published as Bordo, Michael D. and Ronald MacDonald. "The Inter-war Gold Exchange Standard: Credibility and Monetary Independence." Journal of International Money and Finance, February 2003, 22(1): 1-32
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