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A dissonant violin in the international orchestra? Discount rate policy in Italy (1894-1913)

Author

Listed:
  • Di Martino Paolo

    (Department of Economics, Social Studies, Applied Mathematics and Statistics (ESOMAS), University of Torino, Italy;)

  • Bagliano Fabio

    (Department of Economics, Social Studies, Applied Mathematics and Statistics (ESOMAS) and Collegio Carlo Alberto, University of Torino, Italy;)

Abstract

Based on a new series and applying econometric techniques, this paper investigates the discount rate policy implemented by the main Italian bank of issue of the time, the Banca d'Italia. We focus on two interrelated aspects of the problem. Firstly, anchoring our analysis to the Bank's annual reports, we enquiry into the general determinants of its discount rate variations. Secondly, we study the reaction of the Italian rate to exogenous changes in leading international official rates. We show that discount rate variations responded to short-term fluctuations of official rates in the UK and France but, simultaneously, to deviations from long-term equilibrium relations involving two pairs of variables. On the one hand, a relationship between the Italian discount rate and the French open market rate; on the other hand, a link between the Bank's reserve ratio and its exposure to the national credit market. We also show that reactions to variations in foreign official rates were of a very limited magnitude. This ``sterilisation" policy came with little repercussions in terms of exchange rate fluctuations or loss of international reserves, somehow in contrast with the results of the recent literature.

Suggested Citation

  • Di Martino Paolo & Bagliano Fabio, 2022. "A dissonant violin in the international orchestra? Discount rate policy in Italy (1894-1913)," Working papers 077, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    • Handle: RePEc:tur:wpapnw:077
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    References listed on IDEAS

    as
    1. Eichengreen, Barry, 1987. "Conducting the international orchestra: Bank of England leadership under the classical gold standard," Journal of International Money and Finance, Elsevier, vol. 6(1), pages 5-29, March.
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    More about this item

    Keywords

    Bank of Italy; Discount Rate Policy; International Gold Standard; Sterilization;
    All these keywords.

    JEL classification:

    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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