The Gold Standard Peripheries: Monetary Policy, Adjustment and Flexibility in a Global Setting

278 Pages·2012·15.97 MB·English

by  Anders Ögren

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The Gold Standard
Peripheries
Monetary Policy, Adjustment and
Flexibility in a Global Setting
Edited by
Anders bgren
and
Lars Fredrik 0ksendal
palgrave
macmillan
Editorial matter, selection, introduction and conclusion © Anders bgren and
Lars Fredrik 0ksendal 2012
All remaining chapters © respective authors 2012
Softcover reprint of the hardcover 1st edition 2012 ISBN 978-0-230-34317-7
All rights reserved. No reproduction, copy or transmission of this
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First published 2012 by
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ISBN 978-1-349-34459-8 ISBN 978-0-230-36231-4 (eBook)
DOI 10.1057/9780230362314
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A catalog record for this book is available from the Library of Congress.
10 9 8 7 6 5 4 3 2 1
21 20 19 18 17 16 15 14 13 12
Contents
List of Tables and Figures viii
Acknowledgements xiii
Notes on the Contributors xiv
List of Abbreviations xviii
1 The Case for the Peripheries 1
A. Ogren and L. F. 0ksendal
Silver or gold? 3
Managed or automatic? 4
The problem of adjustment and the 'rules of the game' S
What made it successful? 7
What can we learn from the peripheries? 8
PART I SCANDINAVIA
2 Central Banking and Monetary Policy in Sweden during
the Long Nineteenth Century 17
A. Ogren
The influence of the monetary policy of the Riksbank 19
Creating flexibility in a system of rigidity: the Riksbank's
monetary policy 23
Conclusion 33
3 Freedom for Manoeuvre: The Norwegian Gold
Standard Experience, 1874-1914 37
L.F. 0ksendal
Norway in the nineteenth century 38
Understanding the gold standard 39
Norwegian monetary policy constraints 41
Mapping the two phenomena 4S
Mastering conflicting objectives 48
Conclusion S4
4 Price Stability in the Periphery during the International
Gold Standard: Scandinavia S8
O. Honningdal Grytten and A. Hunnes
Overview S9
Data 60
v
vi Contents
Domestic price stability 63
Inflation persistence 68
Cross-border price stability 71
Conclusion 78
5 Monetary Policy in the Nordic Countries during the
Classical Gold Standard Period: The Wicksellian View 81
C. Garda-Iglesias and ,. Kilponen
Introduction 81
Economic and historical background 82
The model 86
Estimation 91
Results of the empirical analysis 93
Conclusion 97
Appendix 98
PART II THE EUROPEAN CONTINENT
6 Foreign Exchange Reserve Management in the Nineteenth
Century: The National Bank of Belgium in the 1850s 107
S. Ugolini
Foreign exchange reserve management in the twenty-first
century 108
Foreign exchange reserve management in the nineteenth
century 109
Financial risk in nineteenth-century foreign reserve
management: Belgium 111
Operational risk in nineteenth-century foreign reserve
management: Belgium 120
Conclusion 126
7 Belgian Monetary Policy under the Gold Standard during
the Interwar Period 130
H. Van der Wee
The first Belgian attempts to restore the gold standard 130
The gold exchange standard under pressure 136
From a gold exchange standard to a gold bullion standard 139
The money supply in Belgium during the interwar period:
an overview 140
Conclusion 144
8 Floating against the Tide: Spanish Monetary Policy,
1870-1931 145
P. Martin-Acena, E. Martinez-Ruiz and P. Nogues-Marco
Capital mobility, fiscal deficits and the balance of payments 147
Contents vii
The monetary policy of the Bank of Spain during the
classical gold standard, 1874-1913 150
The Bank of Spain and the gold exchange standard,
1914-31 159
Conclusion 167
9 Monetary Policy in Southeast Europe on the Road to the
Gold Standard 174
K. Dimitrova and L. Fantacci
Financial stability 176
Monetary autonomy and policy 180
Fiscal interference 183
Conclusion 185
PART III ASIA AND SOUTH AMERICA
10 Domestic Public Debt, Gold Standard and Civil Wars:
Institutional Interconnections in Nineteenth-Century
Colombia 191
A. Rojas Rivera
Fiscal deficit and domestic public debt 192
Monetary impact 195
An impure gold standard 197
Other institutional impacts 203
Conclusion 207
11 The Japanese Economy during the Interwar Period:
Instability in the Financial System and the Impact of
the World Depression 211
M. Shizume
Chronic financial crises and policy responses in the 1920s 212
Reforms in the banking system 215
Return to the gold standard and the Showa depression of
1930-31 218
Conclusion 227
PART IV LESSONS FOR THE FUTURE
12 The Euro and the Gold Standard: What are the Lessons? 231
A. Ogren and L.F. 0ksendal
The gold standard in historical perspective 231
The Euro in historical perceptive 234
The future of the Euro 241
Notes 245
Index 262
List of Tables and Figures
Tables
2.1 OLS regressions on the determinants of reserves of Enskilda
banks 22
2.2 OLS regressions on the determinants of note issuance of
Enskilda banks 23
4.1 Long-term domestic price stability 66
4.2 Short-term domestic price stability 68
4.3 Estimates of mean inflation and inflation persistence for
Denmark, 1815-2000 70
4.4 Estimates of mean inflation and inflation persistence for
Norway, 1815-2000 70
4.5 Estimates of mean inflation (Modell) and inflation
persistence (Model 2) for Sweden, 1815-2000 71
4.6 Correlation matrix on price deviations from HP-filtered
trend 76
4.7 Average standard deviations from annual mean values of
inflation 76
5.1 Prior densities 93
5.2 Summary of the estimation results 94
6.1 Total value of operations implying modifications in the
foreign portfolio, 1851-53 (Belgian francs, million) 114
6.2 Gross profit of all discount activities (domestic and foreign)
and loss on rediscount and exchange, 1851-53 (Belgian
francs, 1000) 119
6.3 Total purchases of foreign bills per correspondent, 1851-53
(Belgian francs, million) 123
6.4 Total purchases of foreign bills per group of correspondents,
1851-53 (Belgian francs, million) 125
8.1 Legal maximum for banknotes issued by the Bank of Spain,
1874-1913 153
viii
List of Tables and Figures ix
8.2 Legal maximum for banknotes issued by the Bank of Spain,
1914-31 163
9.1 Decomposition of money in circulation in Bulgaria,
1885-1912 182
10.1 Characteristics of domestic public debt liabilities,
nineteenth-century Colombia 194
10.2 Denominations of the main domestic debt notes 199
10.3 Sources of Treasury liquidity during nineteenth-century
Colombia 205
11.1 Economic growth and inflation 212
11.2 Chronology of the financial crises of the 1920s 213
Figures
2.1 Annual percentile changes in consumer prices in England,
France, Germany, Denmark and Sweden, 1874-1913 18
2.2 Annual data on Enskilda banks cash assets in relation to
issued notes, 1843-1900 20
2.3 Monthly data on Enskilda banks cash assets in relation to
issued notes, 1878-1900 21
2.4 Riksbank's unused right to issue notes as a percentage of its
total note issuance, 1834-1913 25
2.5 Components of the monetary base, 1834-1900 (SEK 1000) 27
2.6 Annual turnover, reserves, contribution to the monetary
base and equity funds (equity capital plus reserves),
1834-1913 (SEK 1000) 29
2.7 Accumulated Swedish foreign net debt, 1834-1900
(SEK 1000) 29
2.8 Riksbank's unused right to issue notes and foreign bills
of exchange in percentage of issued notes, January
1855-December 1858 (monthly data) 31
3.1 Foreign exchange reserves and note circulation,
1870:1-1914:6 (NOK 1000) 47
3.2 Change in consolidated note reserves versus note
circulation, 1874:1-1914:6 (NOK million) 50