Exchange Rates and Casualties During the First World War

37 Pages Posted: 27 Sep 2001

See all articles by George J. Hall

George J. Hall

Brandeis University - Department of Economics and International Business School; Brandeis University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2001

Abstract

I estimate a single factor model of Swiss exchange rates during World War I for five of the primary belligerents: Britain, France, Italy, Germany, and Austria-Hungary. At the outbreak of the war these nations suspended convertibility of their currencies into gold with the promise that after the war each would restore convertibility at the old par. However, once convertibility was suspended, each currency became a state-contingent claim; after the war it would pay off at (or near) the old par if the country won or pay off significantly less than par (perhaps nothing) if the country lost. The single factor extracted from the five exchange rates appears to contain information on contemporaries' expectations about the war's outcome. Innovations to the single factor are correlated with time series on soldiers killed and wounded and soldiers taken prisoner.

Keywords: First World War, Factor Models, Principal Component Analysis

JEL Classification: E40, N14, N24, F31

Suggested Citation

Hall, George J., Exchange Rates and Casualties During the First World War (August 2001). Cowles Foundation Discussion Paper No. 1321. Available at SSRN: https://ssrn.com/abstract=284848

George J. Hall (Contact Author)

Brandeis University - Department of Economics and International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States
781-736-2242 (Phone)

HOME PAGE: http://people.brandeis.edu/~ghall

Brandeis University - Department of Economics ( email )

Waltham, MA 02454-9110
United States

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