The Specie Standard as a Contingent Rule: Some Evidence for Core and Peripheral Countries, 1880-1990

Michael D. Bordo, Anna J. Schwartz

NBER Working Paper No. 4860 (Also Reprint No. r2109)
Issued in September 1994
NBER Program(s):Development of the American Economy, Monetary Economics

The specie standard that prevailed before 1914 was a contingent rule. Under the rule specie convertibiltity could be suspended in the event of a well understood, exogenously produced emergency, such as a war, on the understanding that after the emergency had safely passed convertibility would be restored at the original parity. Market agents would regard successful adherence as evidence of a credible commitment and would allow th authorities access to seignorage and bond finance at favorable terms. This paper surveys the history of the specie standard as a contingent rule for 21 countries divided into core and peripheral countries. As a comparison we also briedfly consider the Bretton Woods system and the recent managed floating regime. We then present evidence across four regimes (pre-1914 gold standard; interward gold standard; Bretton Woods; the subsequent managed exchange rate float) for the 21 countries on the stability of macro variables as well as on the demand shocks (reflecting policy actions specific to the regime) and supply shocks (reflecting shocks to the environment independence of the regime). These measures allow us to determine whether adherents to the rule consistently pursued different policy actions from nonadherents, and whether persistent adverse shocks to the environment may, for some countries, have precluded adherence to the rule.

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Document Object Identifier (DOI): 10.3386/w4860

Published: Historical Perspectives on the Gold Standard, Barry Eichengreen and Jorge de Macedo, eds. Routledge, 1996. Currency Convertibility: The Gold Standard and Beyond, J. Braga de Macedo, B. Eichengreen, J. Reis, eds., pp. 11-83 (New York: Routledge, 1996).

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