Was London the Conductor of the International Orchestra or Just the Triangle Player? An Empirical Analysis of Asymmetries in Interest Rate Behaviour during the Classical Gold Standard, 1876-1913.

This paper analyzes the interrelationships of official and private discount rates between seven European financial centers and, in particular, between London, Berlin, and Paris. Looking at the days and directions of all official discount rate changes in the seven centers, pairwise leads and lags are analyzed. As to private discount rates, which seems to be stationary, correlations and coherencies are measured, multivariate Granger-causality tests are performed, and impulse response functions are calculated. The paper shows that there are strong mutual feedbacks between interest rates in London, Paris, and Berlin, suggesting that the classical gold standard was a decentralized, multipolar system. Copyright 1996 by Scottish Economic Society.