Exchange Rates in the Periphery and International Adjustment Under the Gold Standard

Author/Editor:

Luis Catão ; Solomos Solomou

Publication Date:

February 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The role of exchange rate flexibility in the periphery of the gold standard has been grossly overlooked. This paper builds a new dataset on trade-weighed exchange rates for the period 1870-1913 and finds that large currency movements in periphery countries operating inconvertible paper-money and silver-standard regimes induced major fluctuations in effective exchange rates worldwide. We relate the phenomenon to the international trade structure at the time and show that such currency fluctuations had powerful effects on trade flows. We conclude that nominal exchange rate flexibility in the periphery was an important ingredient of international payments adjustment under the gold standard.

Series:

Working Paper No. 2003/041

Subject:

Commodities Exchange rates Foreign exchange Gold Nominal effective exchange rate Real effective exchange rates Real exchange rates

English

Publication Date:

February 1, 2003

ISBN/ISSN:

9781451846126/1018-5941

Stock No:

WPIEA0412003

Pages:

37

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