Greenback Era

Unger, Irwin

doi:10.1515/9781400877669

Cited by 76 publications

(24 citation statements)

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“…Although Unger (1964) reports that the financial question had not been of major public concern during the elections, we interpret this exchange-rate dynamics as evidence that Hayes' hard money reputation actually affected the time series.…”

Section: IIImentioning

confidence: 70%

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The restoration of the gold standard after the US Civil War: A volatility analysis

Meulemann

Uebele

Wilfling³

2014

Journal of Financial Stability

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Using a Markov-switching GARCH model this paper analyzes the volatility evolution of the greenback's price in gold from after the Civil War until the return to gold convertibility in 1879. The econometric inference associated with our methodology indicates a switch to a regime of low volatility roughly seven months before the actual resumption. Since this empirical finding is most likely to be reconciled with a change in market expectations, we conclude that expectations affected the exchange rate more than fundamentals. Our analysis also demonstrates that regime switches in the volatility of exchange rates may reflect historical events that remain undiscovered otherwise. In this paper we study the period between the end of the American Civil War and the return to gold in 1879 and contribute to the theoretical debate on the factors that may drive exchange rates. In the literature covering this debate two opposing opinions predominate. On the one hand, monetarists like Friedman and Schwartz (1963) argue that exogenous macroeconomic fundamentals like money supplies, price inflation and price parities cause the high premiums on gold. This view is supported, inter alia, by Kindahl (1961), andOfficer (1981). On the other hand, Calomiris (1992;1988;1985) strongly opposes this view by stating that expectations are more important to the greenback exchange rate than the classical fundamentals (like money supplies). Consequently, Calomiris supports the research pursued, among others, by Mitchell (1903) and Willard et al. (1996) who attempt to incorporate news and significant events in their study of the greenback markets.However, besides these opposing views other authors (e.g. Smith and Smith, 1997) argue that both expectations and macroeconomic fundamentals did play a role in the evolution of the greenback exchange rate. More explicitly our methodology helps us to identify distinct phases (regimes) of high and low exchange-rate volatility. Since such distinct exchange-rate volatility regimes can easily be reconciled with market participants' expectations on future changes in the exchange rate (rather than with changes in fundamentals), we interpret our results as empirical evidence that agents had anticipated the exchange-rate fixing associated with the return to the gold standard beforehand.In particular, our econometric analysis detects a regime switch from high to low exchange-rate volatility several months before the actual resumption thus supporting Calomiris' view that expectations may have mattered more than macroeconomic fundamentals. Our econometric technique also provides a new means of gauging the Civil War and the postbellum period. Initially, from a financial investor's perspective, our results reflect the considerable political uncertainty that characterized the postbellum years. However, the switch to a low volatility regime long before the actual resumption date demonstrates that policy makers were surprisingly able to commit to their announced resumption plan. This paper contains 6 sections. In...

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Section: IIImentioning

confidence: 70%

“…In Section I I we briefly review the historical background for which we rely on some of the established historical literature (e.g. Mitchell, 1903;Friedman and Schwartz, 1963;Unger, 1964). Section III 4 presents our data set.…”

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confidence: 99%

The restoration of the gold standard after the US Civil War: A volatility analysis

Meulemann

Uebele

Wilfling³

2014

Journal of Financial Stability

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“…The Act moved the United States to a 'de facto' gold standard, which meant it would no longer buy silver at a statutory price or convert silver from the public into silver coins (though it would still mint silver dollars for export in the form of trade dollars). [6] The Act had the immediate effect of depressing silver prices. This hurt Western mining interests, who labeled the Act "The Crime of '73."…”

Section: Coinage Act Of 1873mentioning

confidence: 99%

Panic of 1873

2010

Encyclopedia of U.S. Political History

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The Panic of 1873 was a financial crisis that triggered a depression in Europe and North America that lasted from 1873 until 1879, and even longer in some countries. In Britain, for example, it started two decades of stagnation known as the "Long Depression" that weakened the country's economic leadership. [1] The Panic was known as the "Great Depression" until the events in the early 1930s took precedence. [2] The Panic of 1873 and the subsequent depression had several underlying causes, of which economic historians debate the relative importance. Postwar inflation, rampant speculative investments (overwhelmingly in railroads), a large trade deficit, ripples from economic dislocation in Europe resulting from the Franco-Prussian War (1870-1871), property losses in the Chicago (1871) and Boston (1872) fires, and other factors put a massive strain on bank reserves, which plummeted in New York City

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“…For example, Hume (1752), Mill (1844), and Fisher (1911) described short-run ''transitory'' effects of monetary changes on output, the perceived tight-money policies of the second Bank of the United States were partly responsible for its elimination (Gouge, 1833), and the greenback and silver controversies of the latter nineteenth century were popular contests over monetary policy that ebbed and flowed with elections (Friedman and Schwartz, 1963, ch. 3;Unger, 1964;Wood, 2005, ch. 6).…”

Section: Introductionmentioning

confidence: 99%

Political Monetary Cycles Under Alternative Institutions: The Independent Treasury and the Federal Reserve

Heckelman¹,

Wood²

2005

Economics & Politics

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The theory of opportunistic political business cycles predicts incumbent politicians will alter their economic policies to spur short-run growth to attract additional votes for the upcoming election. There has not been much emphasis on the possibility of historical political business cycles prior to the Keynesian Revolution. No study has yet undertaken a systematic approach to testing for policy cycles during this period. Our study will bridge this gap by considering cycles in monetary policy for the periods of 1879-1914 until the start of Fed operations, and 1914-1932 until abandonment of the gold standard. To properly test for political cycles, it is necessary to develop reaction functions for the Treasury and compare against the reaction function later held by the Fed. This also reveals that creation of an independent monetary authority to be insulated from political pressures changed the manner in which policy was directed, aside from political issues. The evidence is not consistent, however, with monetary cycles closely tied to electoral concerns. Copyright Blackwell Publishing Ltd 2005.

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Greenback Era

Cited by 76 publications

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The restoration of the gold standard after the US Civil War: A volatility analysis

The restoration of the gold standard after the US Civil War: A volatility analysis

Panic of 1873

Political Monetary Cycles Under Alternative Institutions: The Independent Treasury and the Federal Reserve

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