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Harvests and Financial Crises in Gold Standard America

Published online by Cambridge University Press:  13 March 2013

Christopher Hanes  and
Paul W. Rhode
Christopher Hanes
Affiliation:
Professor, Department of Economics, State University of New York at Binghamton, P.O. Box 6000, Binghamton, NY 13902. E-mail: [email protected].
Paul W. Rhode
Affiliation:
Professor, Department of Economics, 611 Tappan Street, 205 Lorch Hall, Ann Arbor, MI 48109-1220, and NBER. E-mail: [email protected].
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Abstract

Most American financial crises of the postbellum gold standard era were caused by fluctuations in the cotton harvest due to exogenous factors such as weather. The transmission channel ran through export revenues and financial markets under the pre-1914 monetary regime. A poor cotton harvest depressed export revenues and reduced international demand for American assets, which depressed American stock prices, drained deposits from money center banks and precipitated a business cycle downturn—conditions that bred financial crises. The crises caused by cotton harvests could have been prevented by an American central bank, even under gold standard constraints.

Type
Articles
Information
The Journal of Economic History , Volume 73 , Issue 1 , March 2013 , pp. 201 - 246
Copyright
Copyright © The Economic History Association 2013

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