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

IMF Working Papers, February 1, 2003

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

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Bibliographic details

• Authors: Luis Catão, Solomos Solomou
• Published: February 1, 2003
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451846126.001

Summary and main conclusion

• The role of exchange rate flexibility in the periphery of the gold standard has been grossly overlooked.
• The paper builds a new dataset on trade-weighed exchange rates for the period 1870-1913.
• Large currency movements in periphery countries operating inconvertible paper-money and silver-standard regimes induced major fluctuations in effective exchange rates worldwide.
• Such currency fluctuations had powerful effects on trade flows.
• Conclusion: Nominal exchange rate flexibility in the periphery was an important ingredient of international payments adjustment under the gold standard.

Data and methodology

• New dataset: trade-weighed exchange rates covering the period 1870-1913.
• Focus on periphery countries operating inconvertible paper-money and silver-standard regimes.
• Analysis relates exchange rate movements to the international trade structure of the time.

Findings on exchange-rate behavior and international effects

• Periphery currency movements produced major fluctuations in effective exchange rates worldwide.
• These fluctuations are linked to the structure of international trade during 1870-1913.
• Currency fluctuations in the periphery had powerful effects on trade flows, implying significant external adjustment channels beyond gold-standard center behavior.

Policy implications and interpretation

• Nominal exchange rate flexibility outside the gold-standard core mattered for global adjustment mechanisms.
• Recognition of periphery exchange-rate variability alters how international payments adjustment under the gold standard is understood; peripheral nominal flexibility should be treated as an important component of adjustment dynamics.

Publication and bibliographic specifics

• Authors: Luis Catão, Solomos Solomou
• Date: February 1, 2003
• Series: IMF Working Papers, Working Paper No. 2003/041
• Volume: 2003
• Issue: 041
• Pages: 37
• DOI: https://doi.org/10.5089/9781451846126.001
• Stock No: WPIEA0412003
• ISBN: 9781451846126
• ISSN: 1018-5941

Source: IMF Working Papers landing page for "Exchange Rates in the Periphery and International Adjustment Under the Gold Standard".

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