TY - UNPB

T1 - Monetary regimes and statistical regularity: the Classical Gold Standard (1880-1913) through the lenses of Markov models

AU - Bragoli, Daniela

AU - Ferretti, Camilla

AU - Ganugi, Piero

AU - Ianulardo, Giancarlo

PY - 2013

Y1 - 2013

N2 - We aim at characterizing the Classical Gold Standard period (CGS) in order
to verify if it is endowed with statistical regularity. We study the statistical properties of
two-state annual transition matrices of countries switching from a sound state to a crisis
state focusing on Reinhart and Rogoff 2009 dataset on external debt crises. The CGS
period is governed by homogeneity both in time and across statistical units: the Homogeneous
Markov Chain Model holds whereas the Mover Stayer Model does not. Our work is
linked to the literature on the CGS and credibility (Bordo and Rockoff 1996). We follow a
pure statistical approach to highlight two decisive channels of the credibility mechanism.
The first is the stabilization of the probability of default of sound countries. The second
is the fact that the CGS makes periphery/deficit countries homogeneous to the core with
respect to the probability of default. Both channels are decisive because poor developing
countries can borrow at favorable conditions and finance a level of investment greater than
their capacity of saving.

AB - We aim at characterizing the Classical Gold Standard period (CGS) in order
to verify if it is endowed with statistical regularity. We study the statistical properties of
two-state annual transition matrices of countries switching from a sound state to a crisis
state focusing on Reinhart and Rogoff 2009 dataset on external debt crises. The CGS
period is governed by homogeneity both in time and across statistical units: the Homogeneous
Markov Chain Model holds whereas the Mover Stayer Model does not. Our work is
linked to the literature on the CGS and credibility (Bordo and Rockoff 1996). We follow a
pure statistical approach to highlight two decisive channels of the credibility mechanism.
The first is the stabilization of the probability of default of sound countries. The second
is the fact that the CGS makes periphery/deficit countries homogeneous to the core with
respect to the probability of default. Both channels are decisive because poor developing
countries can borrow at favorable conditions and finance a level of investment greater than
their capacity of saving.

KW - Classical Gold Standard

KW - Credibility

KW - Mover Stayer

KW - Time Homogeneous Markov Chain

KW - Classical Gold Standard

KW - Credibility

KW - Mover Stayer

KW - Time Homogeneous Markov Chain

UR - http://hdl.handle.net/10807/43105

M3 - Working paper

BT - Monetary regimes and statistical regularity: the Classical Gold Standard (1880-1913) through the lenses of Markov models

ER -