Emerging from the war: Gold Standard mentality, current accounts and the international business cycle 1885-1939

Mathias Hoffmann and Ulrich Woitek

No 57, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: We study international business cycles and capital flows in the UK, the United States and the Emerging Periphery in the period 1885-1939. Based on the same set of parameters, our model explains current account dynamics under both the Classical Gold Standard and during the Interwar period. We interpret this as evidence for Gold Standard mentality: the expectation formation mechanism with respect to major macroeconomic variables driving the current account – output, exchange rates and interest rates – has remained fundamentally stable between the two periods. Nonetheless, the macroeconomic environment changed: Volatility increased generally, but less so for international capital flows than for GDP. This pattern is consistent with shocks in the Interwar period becoming more persistent and more global.

Keywords: Current accounts; capital flows; business cycles; Great Depression; Gold Standard; emerging markets; present-value models (search for similar items in EconPapers)
JEL-codes: F32 F36 F40 F41 N1 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-dge, nep-his and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zur:econwp:057

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