Sovereign Risk in the Classical Gold Standard Era.
This paper explores the determinants of sovereign bond yields during the classical gold standard period (1872-1913). Using the Pooled Mean Group methodology, we …find that the main bene…fit of the gold standard was as a short-hand device that enhanced a country's reputation in international cap...
| Main Authors: | , , |
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| Format: | Working paper |
| Language: | English |
| Published: |
Department of Economics (University of Oxford)
2006
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| Summary: | This paper explores the determinants of sovereign bond yields during the classical gold standard period (1872-1913). Using the Pooled Mean Group methodology, we …find that the main bene…fit of the gold standard was as a short-hand device that enhanced a country's reputation in international capital markets. By conveying important information to investors and enhancing the speed of adjustment of sovereign bond spreads to long-run equilibrium levels, the gold standard allowed country risk to be priced more effectively. In contrast to other studies, our results suggest that fundamental factors were more important in determining a country's creditworthiness in the long-run than the exchange rate regime per se. |
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