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Rigid relations: External adjustment under the Gold Standard (1880-1913)

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  • Ward, Felix
  • Chen, Yao

Abstract

External adjustments during the classical gold standard – a fixed exchange rate regime – were associated with few, if any, output costs. This paper analyzes the relative importance of flexible prices, migration and mildly countercyclical monetary policy for this relatively smooth adjustment experience. For this purpose we build and estimate a structural model of the classical gold standard. We find that the sustainability of the gold standard as a fixed exchange rate regime was primarily a consequence of flexible prices. Pre-1914 price flexibility is furthermore largely explicable by large pre-1914 primary sector shares. The paper proceeds in a historical comparative fashion by relating the gold standard experience to that of another fixed-exchange rate regime – today’s eurozone.

Suggested Citation

  • Ward, Felix & Chen, Yao, 2016. "Rigid relations: External adjustment under the Gold Standard (1880-1913)," VfS Annual Conference 2016 (Augsburg): Demographic Change 145930, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc16:145930
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    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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