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Greenback-Gold Returns and Expectations of Resumption, 1862–1879

Published online by Cambridge University Press:  03 March 2009

Gregor W. Smith  and
R. Todd Smith
Gregor W. Smith
Affiliation:
Professor of Economics at Queen's University, Kingston, Ontario, Canada K7L 3N6
R. Todd Smith
Affiliation:
Economist in the Research Department, International Monetary Fund, Washington DC 20431 and Associate Professor of Economics at the University of Alberta
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Abstract

This article proposes a unified framework for studying the greenback-gold price during the U.S. suspension of convertibility from 1862 to 1879.The gold price is viewed as a floating exchange rate, with a fixed destination given by gold standard parity because of the prospect of resumption. This perspective is tested using daily data for the entire period, and the effect of news during and after the Civil War is measured. New evidence of a decline in the volatility of gold returns after the Resumption Act of 1875 provides statistical support for the importance of expectations of resumption.

Type
Articles
Information
The Journal of Economic History , Volume 57 , Issue 3 , September 1997 , pp. 697 - 717
Copyright
Copyright © The Economic History Association 1997

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