Consistency of two major data sources for exchange rates in the interwar period and further evidence on the behaviour of exchange rates during hyperinflations

We exploit a rather neglected source of data, The Commercial and Financial Chronicle to shed light on the behaviour of daily and weekly exchange rates throughout several interwar hyperinflation episodes. The purpose of our analysis is three-fold: firstly, we investigate the consistency of exchange rate data by comparing the rates available from this source to those provided by a widely used source, Einzig (1937). Secondly, we scrutinize the commentaries offered by The Chronicle to shed light on the impact of news on the behaviour of the US dollar/German reichsmark exchange rate over the interwar German hyperinflation, and to check whether the narrative analysis provided therein is consistent with formal econometric analyses in dating when the probability of monetary reform became significantly different from zero. Thirdly, we examine the relationship between the US dollar/German reichsmark spot rate and German wholesale prices during the high inflation period of 1923 using data at (nearly) weekly frequency. We find evidence of long- run purchasing power parity, consistent with the findings of several extant studies that employ monthly data. However, we also show that complete adjustment to purchasing power parity did not appear to occur with the nearly weekly sampled data.