Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913

36 Pages Posted: 6 Jul 2004  

Eugene Canjels

Deloitte Touche Tohmatsu - Washington, D.C. Office

Gauri Prakash-Canjels

Howrey, Simon, Arnold & White - The CapAnalysis Group

Alan M. Taylor

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

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Date Written: June 2004

Abstract

A major question in the literature on the classical gold standard concerns the efficiency of international arbitrage. Authors have examined efficiency by looking at the spread of the gold points, gold point violations, the flow of gold, or by tests of various asset market criteria, including speculative efficiency and interest arbitrage. These studies have suffered from many limitations, both methodological and empirical. We offer a new methodology for measuring market integration based on nonlinear theoretical models and threshold autoregressions. We also compile a new, high-frequency series of continuous daily data from 1879 to 1913. We can derive reasonable econometric estimates of the implied gold points and price dynamics. The changes in these measures over time provide an insight into the evolution of market integration.

Suggested Citation

Canjels, Eugene and Prakash-Canjels, Gauri and Taylor, Alan M., Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913 (June 2004). NBER Working Paper No. w10583. Available at SSRN: https://ssrn.com/abstract=559233

Eugene Canjels

Deloitte Touche Tohmatsu - Washington, D.C. Office ( email )

555 12th Street, NW, Suite 500
Washington, DC 20004-1207
United States
202-378-5114 (Phone)
202-661-1317 (Fax)

Gauri Prakash-Canjels

Howrey, Simon, Arnold & White - The CapAnalysis Group ( email )

1299 Pennsylvania Avenue, NW
Washington, DC 20004
United States
202-383-6815 (Phone)
202-383-7237 (Fax)

Alan M. Taylor (Contact Author)

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

One Shields Drive
Davis, CA 95616-8578
United States
530-752-1572 (Phone)
530-752-9382 (Fax)

HOME PAGE: http://www.econ.ucdavis.edu/faculty/amtaylor/

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
(434)-924-3177 (Phone)
(434)-982-2904 (Fax)

HOME PAGE: http://people.virginia.edu/~amt7u

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

HOME PAGE: http://nber.org

Centre for Economic Policy Research (CEPR)

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London, EC1V 3PZ
United Kingdom

HOME PAGE: http://cepr.org

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