TY  - UNPD
A1  - Gerlach, Stefan
A1  - Kugler, Peter
T1  - Back to gold: Sterling in 1925
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 515
N2  - Expectations of Sterling returning to Gold have been disregarded in empirical work on the US dollar – Sterling exchange rate in the early 1920s. We incorporate such considerations in a PPP model of the exchange rate, letting the probability of a return to gold follow a logistic function. We draw several conclusions: (i) the PPP model works well from spring 1919 to spring 1925; (ii) wholesale prices outperform consumer prices; (iii) allowing for a return to gold leads to a higher speed of adjustment of the exchange rate to PPP; (iv) interest rate differentials and the relative monetary base are crucial determinants of the expected return to gold; (v) the probability of a return to Gold peaked at about 72% in late 1924 and but fell to about 60% in early 1925; and (vi) our preferred model does not support the Keynes’ view that Sterling was overvalued after the return to gold.
T3  - CFS working paper series - 515 
KW  - Gold Standard
KW  - Sterling
KW  - exchange rate
KW  - PPP
KW  - expectations
Y1  - 2015
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/38285
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-382852
UR  - http://ssrn.com/abstract=2663345
IS  - July 30, 2015
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -