Violations of the `Rules of the Game' and the Credibility of the Classical Gold Standard, 1880-1914 / Michael D. Bordo, Ronald MacDonald.

Format:

Book

Author/Creator:

Bordo, Michael D.

Contributor:

National Bureau of Economic Research.

MacDonald, Ronald.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6115.

NBER working paper series no. w6115

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Summary:

This paper examines the recently noted finding that the Classical gold standard represented a credible, well-behaved target zone system from the perspective of the well-documented failure of countries to play by the rules of the game in the classical period. In particular, we test an hypothesis of Svensson (1994) that a credible target zone can confer on a country a degree of independence in the operation of its monetary policy. We propose a number of ways of testing this proposition and implement them for a newly created monthly data base over the period 1880-1913. We demonstrate that the Classical gold standard worked in the way predicted by Svensson's model. This would seem to have an important bearing on the kind of institutional framework required for a modern day target zone (such as the Exchange Rate Mechanism of the European Monetary System) to function effectively and, in particular, to weather speculative attacks.

Notes:

Print version record

July 1997.