Realignment expectations and the US dollar, 1890–1897: was there a ‘Peso problem’?

Paul Hallwood, C., MacDonald, R. and Marsh, I.W. (2000) Realignment expectations and the US dollar, 1890–1897: was there a ‘Peso problem’? Journal of Monetary Economics, 46(3), pp. 605-620. (doi:10.1016/S0304-3932(00)00040-4)

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Abstract

We investigate dollar–sterling exchange rate expectations during the period 1890–1908. We show that the dollar faced a ‘Peso problem’ in that for much of the period financial markets expected it to depreciate against sterling, but this never in fact happened – i.e. expectations were persistently biased. Drawing on the economic history of the period we identify 11 ‘events’ which probably gave rise to realignment expectations. Once the dollar's adherence to the gold standard was settled as a political matter in the 1896 Presidential Election expectations of dollar realignment abruptly subsided and United States interest rates fell relative to British rates.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:MacDonald, Professor Ronald
Authors: Paul Hallwood, C., MacDonald, R., and Marsh, I.W.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Monetary Economics
Publisher:Elsevier
ISSN:0304-3932
ISSN (Online):1873-1295

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