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INTERNATIONAL RESERVES CRISES, MONETARY INTEGRATION, AND THE PAYMENTS SYSTEM DURING THE INTERNATIONAL GOLD STANDARD

Published online by Cambridge University Press:  25 October 2005

PAULA HERNÁNDEZ-VERME
PAULA HERNÁNDEZ-VERME
Affiliation:
Texas A&M University
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Abstract

I model an international payments system with a financial center and periphery to reproduce various aspects of the International Gold Standard. This period was characterized by frequent crises associated with scarce stocks of reserves, high short-term interest rates with subsequent gold inflows, and transmission of output contractions across countries. I find that a common international currency and no legal restrictions on exchange help the periphery share reserves with the financial center, improving the world's welfare and mitigating output losses due to reserve crises. Also, the center has incentives for restrictive rediscounting while the periphery has motives for developing central banking.

Keywords

International Gold StandardInternational Payments SystemsInternational Reserve CrisesMonetary Integration
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 9 , Issue 4 , September 2005 , pp. 516 - 541
Copyright
© 2005 Cambridge University Press

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