Monetary Standards and Exchange Rates

Monetary Standards and Exchange Rates

Monetary Standards and Exchange Rates

Monetary Standards and Exchange Rates

Synopsis

In this volume an international team of distinguished monetary historians examines the historical experience of exchange rate behaviour under different monetary regimes.

Excerpt

Maria Cristina Marcuzzo, Lawrence H. Officer and Annalisa Rosselli

In March 1995 a workshop on “Monetary Standards and Exchange Rates” took place in Perugia, Italy. The workshop was organized by Maria Cristina Marcuzzo and Annalisa Rosselli, two of the editors of this volume, and was financed by a research grant provided by the Italian National Research Council in collaboration with the Research Division of the Bank of Italy. A distinguished group of economists and economic historians from Europe and the United States attended the workshop.

After the conference, the two organizers met with a third participant, Lawrence Officer, to discuss producing a book based on the theme of the conference: understanding the workings of monetary regimes based on metallic standards. It was decided to include a selection of papers from the workshop, constituting most of the volume, and, in addition, to invite a few other researchers to provide chapters, the better to ensure a comprehensive treatment of the topic. The result is this volume, which has the same title as the workshop that began it all.

The term “monetary standard” has both a domestic and international connotation. Domestically, the monetary standard pertains to the basis of the currency and the backing of the money supply. Here a commodity standard is contrasted with a paper standard or fiat money. Metallic standards, a subset of commodity standards, involve gold and/or silver (the “precious metals”) as the standard; and metallic standards are the focus of this volume. Internationally, a metallic standard at home and abroad is associated with a “fixed” exchange rate, meaning an exchange rate bounded by specie points.

However, the distinction between a metallic and paper standard (or, to put the matter simply, a country “on” or “off” gold) is not clear-cut. For analytical purposes, a floating rate can be converted to the corresponding rate that would occur under a specie standard, as is done by Officer (Chapter 8 in this volume). Empirically, the legal and actual standards can diverge. A country can be nominally on a metallic standard but actually on a paper standard. Examples are the United Kingdom and United States during World War I. The opposite is also true: a metallic standard might be . . .

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