Was Adherence to the Gold Standard a "Good Housekeeping Seal of Approval" During the Interwar Period?

46 Pages Posted: 15 Dec 1999 Last revised: 13 Oct 2010

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Michael Edelstein

City University of New York, CUNY Queens College - Department of Economics

Hugh Rockoff

Newark College of Arts & Sciences - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 1999

Abstract

World War I dramatically altered the world's financial landscape. Most countries left the gold standard, and New York replaced London as the major lender in world capital markets. This paper discusses how the gold exchange standard was reconstructed in the 1920s. We show that the U.S. capital market viewed returning to the gold standard as a signal of financial rectitude, what we have referred to in other work as a 'Good Housekeeping Seal of Approval.' When countries returned to gold, especially when they did so at the prewar parity, they were rewarded with the ability to borrow at substantially lower interest rates. Other signals of financial rectitude, such as small fiscal deficits, apparently carried little weight with lenders.

Suggested Citation

Bordo, Michael D. and Edelstein, Michael and Rockoff, Hugh T., Was Adherence to the Gold Standard a "Good Housekeeping Seal of Approval" During the Interwar Period? (June 1999). NBER Working Paper No. w7186. Available at SSRN: https://ssrn.com/abstract=171540

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

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Michael Edelstein

City University of New York, CUNY Queens College - Department of Economics ( email )

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Flushing, NY 11367-1597
United States

Hugh T. Rockoff

Newark College of Arts & Sciences - Department of Economics ( email )

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Newark, NJ 07102
United States
732-932-7857 (Phone)
732-932-7416 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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