The Specie Standard as a Contingent Rule: Some Evidence for Core and Peripheral Countries, 1880-1990

72 Pages Posted: 11 Jun 2000

See all articles by Michael D. Bordo

Michael D. Bordo

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

Anna J. Schwartz

City University of New York (CUNY); National Bureau of Economic Research (NBER) - NY Office

Date Written: September 1994

Abstract

The specie standard that prevailed before 1914 was a contingent rule. Under the rule specie convertibiltity could be suspended in the event of a well understood, exogenously produced emergency, such as a war, on the understanding that after the emergency had safely passed convertibility would be restored at the original parity. Market agents would regard successful adherence as evidence of a credible commitment and would allow th authorities access to seignorage and bond finance at favorable terms. This paper surveys the history of the specie standard as a contingent rule for 21 countries divided into core and peripheral countries. As a comparison we also briedfly consider the Bretton Woods system and the recent managed floating regime. We then present evidence across four regimes (pre-1914 gold standard; interward gold standard; Bretton Woods; the subsequent managed exchange rate float) for the 21 countries on the stability of macro variables as well as on the demand shocks (reflecting policy actions specific to the regime) and supply shocks (reflecting shocks to the environment independence of the regime). These measures allow us to determine whether adherents to the rule consistently pursued different policy actions from nonadherents, and whether persistent adverse shocks to the environment may, for some countries, have precluded adherence to the rule.

Suggested Citation

Bordo, Michael D. and Schwartz, Anna J., The Specie Standard as a Contingent Rule: Some Evidence for Core and Peripheral Countries, 1880-1990 (September 1994). NBER Working Paper No. w4860. Available at SSRN: https://ssrn.com/abstract=226516

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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Cambridge, MA 02138
United States

Anna J. Schwartz

City University of New York (CUNY) ( email )

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New York, NY 10010
United States

National Bureau of Economic Research (NBER) - NY Office

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New York, NY 10016-4309
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212-817-7957 (Phone)

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