TY  - JOUR
AU  - Bordo,Michael D.
AU  - MacDonald,Ronald
TI  - Violations of the `Rules of the Game' and the Credibility of the Classical Gold Standard, 1880-1914
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6115
PY  - 1997
Y2  - July 1997
UR  - http://www.nber.org/papers/w6115
L1  - http://www.nber.org/papers/w6115.pdf
N1  - Author contact info:
Michael D. Bordo
Department of Economics
Rutgers University
New Jersey Hall
75 Hamilton Street
New Brunswick, NJ 08901
Tel: 732/822-7152
Fax: 732/932-7416
E-Mail: bordo@econ.rutgers.edu

Ronald MacDonald
Department of Economics
University of Glasgow
Glasgow, G12 8RT, UK
E-Mail: r.macdonald@socsi.gla.ac.uk
AB  - 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.
ER  -