We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 13 October 2009
Definition of regime efficiency
Two concepts of gold-standard efficiency are explored in this study. Market efficiency, involving the behavior of private parties in response to the profit opportunities afforded by the gold standard, was the topic of part V. Gold-point arbitrage (GPA) market efficiency was tested empirically for three time periods: 1890–1906, 1925–31, and 1950–66. Uncovered and covered interest arbitrage (UIA, CIA) and forward speculation (FS) efficiency were tested only for 1925–31.
Related to market efficiency but distinct is regime efficiency, pertaining to the probability of maintenance of the gold standard with the existing mint parity. This type of efficiency will be studied empirically in detail only for 1925–31 but as a general phenomenon for all periods over 1791–1931, 1950–66.
The criterion of regime efficiency is that private participants and central banks behave in such a way that the probability of maintenance of the gold standard is, ideally, maximized, or at least enhanced. The regime efficiency considered is short run in nature, encompassing only the horizon of the interest arbitrageurs and forward speculators. It is certainly true that long-run regime efficiency of the dollar–sterling gold standard in 1925–31 was low – because of (1) Britain's overvalued currency relative not just to the dollar but also to the undervalued currencies of Britain's trading competitors (France and Belgium), (2) Britain's downwardly rigid wages, unfavorable shifts in comparative advantage, and capital-account weakness, and (3) the precariousness of short-term foreign funds in London.
To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.
Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.
Find out more about the Kindle Personal Document Service.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.
