11 - Internal integration

Summary

The model

In 1929 the greatest historian of the dollar–sterling exchange rate wrote:

Data on the course of exchange on London constitute one of the longest available statistical series on a monthly basis relating to American experience. Figures, most of which have already been tabulated, permit us to carry the study back over a century and a quarter. They are, accordingly, unusually tempting to the investigator who wishes to discover, if he can, by modern statistical analysis, new features of the economic history of the United States.

Cole (1929b, p. 203)

Since that date, the issue on which researchers have concentrated using dollar–sterling exchange-rate data is integration in the foreign-exchange market. This type of analysis was considered in chapter 7. Historians have used gold-point data to explore the same issue, but in a compartmentalized fashion, without reference to the exchange rate. This work was examined and developed in chapter 10.

One problem with the research of previous authors is the use of inappropriate exchange-rate or gold-point data – a defect corrected in chapters 7 and 10 through the employment of the data generated in this study. Other limitations, however, are methodological in nature and retained in the earlier chapters.

First, it is not stated why the gold-point spread itself rather than some transformation is the appropriate measure of external integration. Second, internal integration – the logical complement to external integration – is not even considered conceptually, let alone measured.