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Canada and the Gold Standard : Balance of Payments Adjustment under Fixed Exchange Rates, 1871-1913 - Trevor J.O. Dick

Canada and the Gold Standard

Balance of Payments Adjustment under Fixed Exchange Rates, 1871-1913

Hardcover Published: 24th April 1992
ISBN: 9780521404082
Number Of Pages: 254

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In this re-examination of Canada's balance-of-payments experience under the gold standard, the authors develop and empirically test a new portfolio approach to the mechanism of balance-of-payments adjustment. This adjustment mechanism responded to massive inflows of foreign capital during a critical period of Canada's economic growth in the early years of the twentieth century. The authors show that the existence of international mobility of capital requires a fundamental revision of the price-specie-flow theory that has traditionally been used to explain adjustment when the balance of payments was more nearly dominated by the balance of trade. The approach taken by Professors Dick and Floyd not only answers the critics of Jacob Viner, who first explored the Canadian case after 1900, but also offers a new perspective on how the gold standard in general actually worked. This new interpretation of the Canadian experience is an extension of the monetary approach to balance-of-payments adjustment that realizes the full implications of international capital mobility. Interest-rate differentials do not drive capital flows, but instead reflect risk premiums set by the exchange of imperfectly substitutable securities of different countries in world-asset markets. Changes in domestic relative to foreign price levels equalibrate markets for goods, but to any fixed exchange-rate system when capital is internationally mobile.

"Dick and Floyd, two respected economists, have written an interesting and challenging interpretation of how the Canadian economy functioned under the gold standard during a period of massive capital flows as much as they reflect risk differences between imperfect security substitutes in the world's money markets...A must acquisition for any collection on international capital theory, international economics, or general economic theory." Choice "...consitiutes an important and provocative analysis of the Canadian adjustment process under the gold standard." Georg Rich, Journal of Economic History

List of tables and figures
Preface
Introduction
The standard neoclassical specie-flow mechanism
A new view of gold standard adjustment
An empirical overview
Statistical tests of goods and asset market adjustments
Evidence on the process of balance-of-payments adjustment
Some further evidence on structure and timing
'Canada's balance': Viner and his critics
The theoretical implications of capital mobility
'Canada's balance of indebtedness': reinterpretating the historical evidence
Conclusions: How the gold standard worked
Appendices
References
Index
Table of Contents provided by Publisher. All Rights Reserved.

ISBN: 9780521404082
ISBN-10: 0521404088
Series: Studies in Macroeconomic History
Audience: Professional
Format: Hardcover
Language: English
Number Of Pages: 254
Published: 24th April 1992
Publisher: Cambridge University Press
Country of Publication: GB
Dimensions (cm): 22.8 x 15.2  x 1.7
Weight (kg): 0.54