TY  - JOUR
AU  - Obstfeld,Maurice
AU  - Taylor,Alan M.
TI  - Sovereign Risk, Credibility and the Gold Standard: 1870-1913 versus 1925-31
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9345
PY  - 2002
Y2  - November 2002
UR  - http://www.nber.org/papers/w9345
L1  - http://www.nber.org/papers/w9345.pdf
N1  - Author contact info:
Maurice Obstfeld
Department of Economics
University of California, Berkeley
530 Evans Hall #3880
Berkeley, CA 94720-3880
Tel: 510/643-9646
Fax: 510/642-6615
E-Mail: obstfeld@econ.berkeley.edu

Alan M. Taylor
Department of Economics
University of Virginia
Monroe Hall
Charlottesville, VA 22903
Fax: (434) 982-2904
E-Mail: alan.m.taylor@virginia.edu
AB  - 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.
ER  -