Economics Research Seminar – Dr Nektarios Aslanidis
Economics Research Seminar – Dr Nektarios Aslanidis
Title: Latin America’s Experience with the Gold Standard, 1867-1931
Date: 26 February 2025
Time: 13:30 – 14:30
Venue: NUBS.4.23
If you would like to attend, please register using the following link:
Latin America’s Experience with the Gold Standard, 1867-1931
Speaker: Dr Nektarios Aslanidis, Associate Professor at Research Center on Economics and Sustainability, Universitat Rovira i Virgili
Nektarios Aslanidis main research interests are in empirical macroeconomics/finance and quantitative macroeconomic history. He has published several articles in international journals such as the Journal of Economic History, Journal of Banking and Finance, Journal of Empirical Finance, Finance Research Letters and Economic Modelling. Before joining the Universitat Rovira i Virgili, he taught at the University of Crete, University of Sydney, Monash University, University of New South Wales and the Copenhagen Business School. He has been a visiting fellow at the Ente Luigi Einaudi of Bank of Italy, at the Center for Research in Econometric Analysis of Time Series of Aarhus University and at the Cyprus University of Technology.
Abstract:
There is a large body of international monetary history research providing empirical evidence that central banks in core countries enjoyed room for maneuver to cushion the deflationary effects of gold outflows under the 1870-1914 classical gold standard. This flexibility allowed core countries to sterilize the effects of international shocks on their domestic money supply (Bloomfield, 1959; Bordo and Schwartz, 1984; Eichengreen, 2008; Morys, 2013; Bazot, Monnet and Morys, 2022, 2024). The literature on peripheral countries typically focuses on countries with central banks. The primary conclusion drawn from this literature is that these countries faced greater difficulties in maintaining their commitment to the gold standard monetary system (Morys, 2013; Aceña and Reis, 2000; Ögren and Øksendal, 2012). Peripheral countries often relied on both sterilization and restrictions on gold convertibility (i.e., capital controls) to minimize reserve losses. Further research into these cases could provide valuable insights into the diverse challenges faced by different types of peripheral economies in maintaining monetary stability during this period. Before 1913, central banking was primarily a European phenomenon, with Japan as a notable exception outside Europe. The absence of a central bank in the United States before 1913 had significant economic implications for the country. Research by Bazot, Monnet, and Morys (2022) revealed that during the gold standard era of 1891-1913, the United States experienced more pronounced reactions in interest rates to international shocks compared to nations with established central banks. The current paper examines whether Latin American economies without central banks, operating under the gold standard through commercial banks with note issuance rights, enjoyed flexibility or had to strictly follow the “rules of the game” (as described by Keynes). Latin America offers numerous examples of countries without central banks before World War I. We aim to address the following questions: Was adhering to the gold standard more difficult without central banks than with central banks? And if so, what were the economic consequences for their economic performance during the interwar period? Latin American economies during the first globalization era (c. 1870-1914) were highly integrated into the world economy and benefited from increased global demand for primary products. They experienced transportation advancements (railways and steamships) and large capital inflows (especially from Britain, but also from other 2 European countries and the United States). Many of these countries transitioned to the gold standard between the late 19th and early 20th centuries, with the timing varying by nation (Argentina 1899, Mexico 1905, Brazil 1906). Latin American countries were primary-producing and capital-dependent economies, suggesting prima facie a more difficult experience with fixed exchange-rates. Yet in recent work, Díaz (2023) and Aslanidis and Díaz (2024) investigate Uruguay, a small open economy, and show how the country managed to stay on gold from 1876 to 1913. We aim to build on these two research strands put forward by Bazot, Monnet, and Morys (2022; 2024), Díaz (2023) and Aslanidis and Díaz (2024) and investigate the experiences of the largest Latin American countries (Argentina, Brazil, and Mexico), contributing to an important question: How different (or similar) was the gold standard experience on both sides of the Atlantic? And do any differences explain why Latin American countries moved towards European-style central banks in the interwar period (similar to the U.S. with the foundation of the Federal Reserve in 1913)? Our current benchmark analysis is interest rate pass-through of the Bank of England (BoE) rate on domestic (market) interest rates using a structural VAR framework. Preliminary results for Uruguay and Argentina indicate pass-through rates around 30% and a tendency to increase at the turn of the twentieth century. These results are broadly in line with the U.S. (a country without central bank before 1913), as found in Bazot, Monnet, and Morys (2022).
Bibliography Aceña P.M. and J. Reis (2000), Monetary Standard in the Periphery: Paper, Silver and Gold, 1854-1933. Macmillan Publishers Ltd. Aslanidis N. and G. Díaz (2024), The Gold Standard and the Rules of the Game: Lessons from The Uruguayan Experience, Universidad de la República, Uruguay, Mimeo. Bazot G., E. Monnet and Morys M. (2022), Taming the Global Financial Cycle: Central Banks as shock absorbers in the First Era of Globalization. Journal of Economic History 82, 801-839. Bazot G., E. Monnet and Morys M. (2024), Central Banks and the Absorption of International Shocks (1891-2019), CEPR Discussion Paper DP19646. Bloomfield A. (1959), Monetary Policy under the International Gold Standard: 1880- 1914. New York: Federal Reserve of New York. Bordo M.D. and A.J. Schwartz (1984), A Retrospective on the Classical Gold Standard, 1821-1931, University of Chicago Press. Della Paolera G. and A.M. Taylor (2001), Straining the Anchor: The Argentine Currency Board and the Search for Macroeconomic Stability, 1880-1935. University of Chicago Press. 3 Díaz G. (2023). Essays on the gold standard: the case of Uruguay. Doctoral Thesis. Montevideo: Universidad de la República (Uruguay). Facultad de Ciencias Sociales. https://www.colibri.udelar.edu.uy/jspui/handle/20.500.12008/36870 Eichengreen B. (2008). Globalizing Capital: A History of the International Monetary System. Princeton University Press. Morys M. (2013), Discount rate policy under the Classical Gold Standard: Core versus periphery (1870s–1914), Explorations in Economic History 50, 205-226. Ögren A. and L.F. Øksendal (2012), The Gold Standard Peripheries: Monetary Policy, Adjustment and Flexibility in a Global Setting. Palgrave Macmillan Studies in Banking and Financial Institutions.