Exchange Rates and Casualties During the First World War

32 Pages Posted: 11 Oct 2002

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: October 2002

Abstract

I estimate two factor models of Swiss exchange rates during the FirstWorldWar. I have data 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, the value of each currency depended on the outcome of the war. I decompose exchange rate movements into a common trend, a common factor, and country-specific factors. Movements in the common trend are consistent with the quantity theory of money. The common factor contains information on contemporaries' expectations about the war's resolution. Innovations to this common factor are correlated with time series on soldiers killed, wounded, and taken prisoner.

Suggested Citation

Hall, George J., Exchange Rates and Casualties During the First World War (October 2002). NBER Working Paper No. w9261. Available at SSRN: https://ssrn.com/abstract=338868

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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