Sovereign Risk, Credibility and the Gold Standard: 1870-1913 versus 1925-31 / Maurice Obstfeld, Alan M. Taylor.

Format:

Book

Author/Creator:

Obstfeld, Maurice.

Contributor:

National Bureau of Economic Research.

Taylor, Alan M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9345.

NBER working paper series no. w9345

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Sovereign Risk, Credibility and the Gold Standard

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

What determines sovereign risk? We study the London bondmarket from the 1870s to the 1930s. Our findings support conventional wisdom concerning the low credibility of the interwar gold standard. Before 1914 gold standard adherence effectively signalled credibility and shaved 40 to 60 basis points from country borrowing spreads. In the 1920s, however, simply resuming prewar gold parities was insufficient to secure such benefits. Countries that devalued before resumption were treated favorably, and markets scrutinized other signals. Public debt and British Empire membership were important determinants of spreads after World War One, but not before.

Notes:

Print version record

November 2002.