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Was the emergence of the international gold standard expected? Evidence from Indian Government securities

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  • Flandreau, Marc
  • Oosterlinck, Kim

Abstract

The emergence of the gold standard has for a long time been viewed as inevitable. We analyze agents' expectations using the spread between gold and silver bonds issued by the Indian government. We find that bimetallism was credible until France surprised markets by suspending domestic operation of bimetallism, triggering a run away from silver. Thereafter, markets began demanding a premium to hold silver bonds, indicating their belief that silver would depreciate in the future as more countries moved on gold.

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  • Flandreau, Marc & Oosterlinck, Kim, 2012. "Was the emergence of the international gold standard expected? Evidence from Indian Government securities," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 649-669.
    • Handle: RePEc:eee:moneco:v:59:y:2012:i:7:p:649-669
    DOI: 10.1016/j.jmoneco.2012.09.001
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    2. Christopher M. Meissner, 2015. "The Limits of Bimetallism," NBER Working Papers 20852, National Bureau of Economic Research, Inc.
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    4. Nils Herger, 2017. "Testing the interest parity condition with Irving Fisher's example of Indian rupee and sterling bonds in the London financial market (1869 - 1906)," Working Papers 17.04, Swiss National Bank, Study Center Gerzensee.
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