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Central Banks' Intervention in Exchange Rate Markets During the "Classical" Gold Standard: Italy 1880-1913

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  • Paolo Di Martino

    (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)

Abstract

This paper reconstructs the history of direct interventions to support the exchange rate performed by Italian banks of issue between 1880 and 1913. The paper, based on coeval documents, shows how in Italy "central banks" played an active role over the whole period targeting, in particular, the price of public bonds traded internationally as the difference between this price and the one in domestic markets could activate arbitrages able to influence the exchange rate. The paper shows that the end- result of these interventions depended on the interconnection between three variables: the volume of Italian bonds traded internationally, the amount of forex reserves held by "central banks", and the trust in the Italian public finances.

Suggested Citation

  • Paolo Di Martino, 2021. "Central Banks' Intervention in Exchange Rate Markets During the "Classical" Gold Standard: Italy 1880-1913," Working papers 072, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    • Handle: RePEc:tur:wpapnw:072
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    File URL: https://www.bemservizi.unito.it/repec/tur/wpapnw/m72.pdf
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    References listed on IDEAS

    as
    1. Matthias Morys & Guillaume Daudin & Kevin H. O'Rourke, 2008. "Globalization, 1870-1914," Economics Series Working Papers 395, University of Oxford, Department of Economics.
    2. Tattara, Giuseppe, 2003. "Paper money but a gold debt: Italy on the gold standard," Explorations in Economic History, Elsevier, vol. 40(2), pages 122-142, April.
    3. Fratianni,Michele & Spinelli,Franco, 2005. "A Monetary History of Italy," Cambridge Books, Cambridge University Press, number 9780521023450, September.
    4. Anders Ögren & Lars Fredrik Øksendal (ed.), 2012. "The Gold Standard Peripheries," Palgrave Macmillan Studies in Banking and Financial Institutions, Palgrave Macmillan, number 978-0-230-36231-4, June.
    5. Tattara, Giuseppe & volpe, mario, 1997. "Italy, the fiscal dominance model, and the gold standard age," MPRA Paper 37155, University Library of Munich, Germany.
    6. Franco Bonellli & Elio Cerrito, 2000. "L'emergere di una funzione pubblica di controllo monetario. La Banca d'Italia dal 1894 al 1913 (II)," Rivista di storia economica, Società editrice il Mulino, issue 1, pages 65-110.
    7. Bazot, Guillaume & Bordo, Michael D. & Monnet, Eric, 2016. "International shocks and the balance sheet of the Bank of France under the classical gold standard," Explorations in Economic History, Elsevier, vol. 62(C), pages 87-107.
    8. Jobst, Clemens, 2009. "Market leader: the Austro-Hungarian Bank and the making of foreign exchange intervention, 1896–1913," European Review of Economic History, Cambridge University Press, vol. 13(3), pages 287-318, December.
    9. Monnet, Eric & bazot, guillaume & Morys, Matthias, 2019. "Taming the Global Financial Cycle: Central Banks and the Sterilization of Capital Flows in the First Era of Globalization (1891," CEPR Discussion Papers 13895, C.E.P.R. Discussion Papers.
    10. Matthias Morys & Guillaume Daudin & Kevin H. O'Rourke, 2008. "Globalization, 1870-1914," Economics Series Working Papers 395, University of Oxford, Department of Economics.
    11. Bazot, Guillaume & Monnet, Eric & Morys, Matthias, 2019. "Taming the gobal financial cycle: Central banks and the sterilization of capital flows in the first era of globalization," IBF Paper Series 03-19, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.
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