Saving, Investment, and Gold: A Reassessment of Historical Current Account Data

61 Pages Posted: 9 Feb 1998 Last revised: 6 Oct 2010

See all articles by Matthew T. Jones

Matthew T. Jones

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department

Maurice Obstfeld

University of California, Berkeley - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: July 1997

Abstract

This paper revises pre-World War II current account data for thirteen countries by treating gold flows on a consistent basis. The standard historical data sources often fail to distinguish between monetary gold exports, which are capital-account credits, and nonmonetary gold exports, which are current-account credits. The paper also adjusts historical investment data to account for changes in inventories. The revised data are used to construct estimates of saving and investment over the period from 1850 to 1945. Our methodology for removing monetary gold flows from the current account leads naturally to a gold-standard version of the Feldstein-Horioka hypothesis on capital mobility. The regression results are in broad agreement with those of Eichengreen, who found a significantly positive cross-sectional correlation between saving and investment even during some periods when the gold standard prevailed. Despite reaching broadly similar conclusions, we estimate correlations between saving and investment that are somewhat lower and less significant than those Eichengreen found. In particular, we find that in comparison to other interwar subsamples, the saving-investment correlation is markedly low during the fleeting years of a revived world gold standard, 1925-1930.

Suggested Citation

Jones, Matthew Thomas and Obstfeld, Maurice, Saving, Investment, and Gold: A Reassessment of Historical Current Account Data (July 1997). NBER Working Paper No. w6103. Available at SSRN: https://ssrn.com/abstract=55164

Matthew Thomas Jones

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Maurice Obstfeld (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-643-9646 (Phone)
510-642-6615 (Fax)

HOME PAGE: http://emlab.berkeley.edu/users/obstfeld/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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