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The Chinese Silver Standard: Parity, Predictability, and (In)Stability, 1912–1934

Author

Listed:
  • Huachen Li
  • James M. Nason

Abstract

This paper assesses the debate about the demise of the Chinese silver standard in the mid 1930s. One side argues the U.S. Silver Purchase Act of June 1934 drained China of silver, which caused deflation and economic crises. A related claim is the Chinese silver standard was intrinsically unstable. These hypotheses are evaluated by estimating Bayesian structural VARs with drifting parameters on China-U.K. and China-U.S. samples from April 1912 to September 1934. We find instability in the Chinese silver standard peaked during the recession of the early 1920s and the Great Depression. Hence, neither the U.S. Silver Purchase Act of June 1934 nor a design flaw led to the end of the Chinese silver standard.

Suggested Citation

  • Huachen Li & James M. Nason, 2024. "The Chinese Silver Standard: Parity, Predictability, and (In)Stability, 1912–1934," CAMA Working Papers 2024-64, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2024-64
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2024-10/64_2024_li_nason.pdf
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    More about this item

    Keywords

    China; silver standard; exchange rate; parity deviation; Bayesian structural VAR;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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