Search Results
Report
Great expectations and the end of the depression
This paper argues that the U.S. economy's recovery from the Great Depression was driven by a shift in expectations brought about by the policy actions of President Franklin Delano Roosevelt. On the monetary policy side, Roosevelt abolished the gold standard and-even more important-announced the policy objective of inflating the price level to pre-depression levels. On the fiscal policy side, Roosevelt expanded real and deficit spending. Together, these actions made his policy objective credible; they violated prevailing policy dogmas and introduced a policy regime change such as that ...
Working Paper
Did adhering to the gold standard reduce the cost of capital?
A commonly cited benefit of the pre-World War One gold standard is that it reduced the cost of international borrowing by signaling a country?s commitment to financial probity. Using a newly constructed data set that consists of more than 55,000 monthly sovereign bond returns, we test if gold-standard adherence was negatively correlated with the cost of capital. Conditional on UK risk factors, we find no evidence that the bonds issued by countries off gold earned systematically higher excess returns than the bonds issued by countries on gold. Our results are robust to allowing betas to differ ...
Discussion Paper
Real exchange rates under the gold standard
Purchasing power parity is one of the most important equilibrium conditions in international macroeconomics. Empirically, it is also one of the most hotly contested. Numerous recent studies, for example, have sought to determine the validity of purchasing power parity using data from the post-Bretton-Woods float and have reached different conclusions. We assert that most such studies are flawed for two reasons. First, the post-1973 data contain, by definition, only a very limited amount of the low-frequency information relevant for examination of long-run parity. Second, the dynamic ...
Journal Article
The changing role of gold in the International Monetary System
Special issue on gold
Journal Article
Gold policy: the thirties and the seventies
Special issue on gold
Working Paper
Central banking under the gold standard
This paper is intended as a positive analysis of temporary government policy actions under a gold standard. To understand a gold standard is to understand the private valuation of money and gold as assets, and how their asset values can be influenced by government money and gold policy actions under a fixed money price of gold. An intertemporal, rational expectations, asset-pricing model is employed to address these issues.
Working Paper
The real exchange rate and fiscal policy during the gold standard period: evidence from the United States and Great Britain
We study the determinants of the dollar/pound real exchange rate from 1879 to 1914 focusing on the role of fiscal policy. We present a simple dynamic model of the real exchange rate to frame our analysis. The econometric results are based upon the decomposition of the sources of the innovation of the real exchange rate drawn from a structural vector autoregression model. We find little evidence that changes in tariffs and government spending affected the real exchange rate. There is some stronger empirical evidence that shocks to deficits were associated with the fluctuations in the real ...
Working Paper
Price-Level Determination Under the Gold Standard
We present a micro-founded monetary model of a small open economy to examine the behavior of money, prices, and output under the gold standard. In particular, we formally analyze Hume’s celebrated price-specie flow mechanism. Our framework incorporates the influence of international trade on the money supply in the Home country through gold flows. In the short run, a positive correlation exists between the quantity of money and the price level. Additionally, we demonstrate that money is non-neutral during the transition to the steady state, which has implications for welfare. While the gold ...