An Exorbitant Privilege in the First Age of International Financial Integration

Abstract

The exorbitant privilege literature analyzes the positive differential returns on net foreign assets enjoyed by the United States in the last quarter of the twentieth century as the issuer of the global reserve currency. In the first age of international financial integration , the global reserve currency of the period was the British pound sterling. Whether the United Kingdom enjoyed a similar privilege is analyzed with a new dataset, encompassing microdata on railroad and government financial securities. The use of microdata avoids the flaws that have plagued the US studies, particularly the use of incompatible aggregate variables. New measures of Britain's net external position provide estimates on capital gains and dividend yields. Chapter 4 further analyzes and develops the results of chapter 3 in order to deepen the insights of the benefits enjoyed by Britain. Chapter 5 provides a detailed description of the data sources in order to facilitate its use in future research, as well as the specific procedures used for cleaning and organizing the data. Chapter 6 concludes.iv Dedication Para Mariana, a coautora da minha alma, e todos os outros esquilos e passarinhos.v