Exchange rate stability in the nineteen-thirties : Britain, North America and the Gold Bloc

Preview

PDF WRAP_Theses_Redmond_1982.pdf - Submitted Version - Requires a PDF viewer. Download (29MB) | Preview

Request Changes to record.

Abstract

The starting point of the thesis is the contention of Nurkse (19MO that exchange rates in the 1930's were unstable and subject to destabilising speculation. This view has been widely accepted and the few studies that have examined the issue since tend to be obscure and limited in scope.

The principal objective of the present study is to provide a thorough (mainly econometric) test of the counterhypothesis that exchange rates were, in fact, determined by "economic fundamentals" (particularly relative prices, incomes and interest rate differentials) in this period. Consequently, a model of exchange rate determination is developed and applied to the currencies of Britain, America, Canada, France, Belgium, Holland and Switzerland, both bilaterally and multilaterally.

The calculation of multilateral (or effective) exchange rates for the 1930's was considered a useful exercise in itself since they did not appear to be available. It seemed, therefore, desirable to digress and examine the methodology of their construction and to consider some general implications of referring to multilateral (instead of bilateral) exchange rates in the 1930's, before using them to test the central hypothesis multilaterally.

The main conclusion of the thesis is that, to a large extent, exchange rates were indeed determined by "economic fundamentals" and were not distorted by persistent de-stabilising speculation (the Nurkse view), although the latter was important occasionally. The evidence was stronger for bilateral than multilateral rates; however, this probably reflects the limited nature of the tests involving the latter. Finally, where there was sufficient information for an adequate test, official intervention was also found to be important and, more generally, it was argued that any instability wa6 probably due more to government intervention than to de-stabilising speculation.

Request changes or add full text files to a record

Repository staff actions (login required)

View Item