NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Inter-War Gold Exchange Standard: Credibility and Monetary Independence

Michael D. Bordo, Ronald MacDonald

NBER Working Paper No. 8429
Issued in August 2001
NBER Program(s):   DAE   ME

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.

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Published:

  • 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 ,
  • 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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