NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Exchange Rates and Casualties During the First World War

George J. Hall

NBER Working Paper No. 9261
Issued in October 2002
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, Public Economics

I estimate two factor models of Swiss exchange rates during the FirstWorldWar. I have data for five of the primary belligerents: Britain, France, Italy, Germany, and Austria-Hungary. At the outbreak of the war, these nations suspended convertibility of their currencies into gold with the promise that after the war each would restore convertibility at the old par. However, once convertibility was suspended, the value of each currency depended on the outcome of the war. I decompose exchange rate movements into a common trend, a common factor, and country-specific factors. Movements in the common trend are consistent with the quantity theory of money. The common factor contains information on contemporaries' expectations about the war's resolution. Innovations to this common factor are correlated with time series on soldiers killed, wounded, and taken prisoner.

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Document Object Identifier (DOI): 10.3386/w9261

Published: Hall, George J. "Exchange Rates And Casualties During The First World War," Journal of Monetary Economics, 2004, v51(8,Nov), 1711-1742. citation courtesy of

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