Solomos Solomou

Effective Exchange Rates and the Classical Gold Standard Adjustment

Using a new international dataset of trade-weighed exchange rates, this paper highlights a neglected adjustment mechanism in the classical gold standard literature. Since gold-pegged countries traded extensively with economies operating more flexible monetary regimes and where parity change was a common adjustment device to systemic shocks, we show that such parity adjustments induced worldwide swings in nominal effective exchange rates. These translated into real exchange rate variations to which trade balances responded with an average elasticity of unity and in the direction of restoring external disequilibria. We conclude that some nominal exchange rate flexibility thus present in the pre-1914 system was instrumental to international payments adjustment.

Balanced estimates of UK GDP 1870–1913

Abstract The three different ways of calculating GDP lead to different results. This problem is more marked in the period before 1914 than with the more recent data. The conventional solution is to resolve the discrepancy by calculating a compromise estimate as an arithmetic average of the three different estimates. Such an approach has little basis in statistical theory. This paper presents balanced estimates of GDP derived using a more satisfactory statistical method. It then compares these balanced estimates with the more conventional compromise estimates.

Balanced Estimates of National Accounts when Measurement Errors are Autocorrelated: The UK, 1920-38

It is frequently argued that changes in economic variables are measured more reliably than their levels. This may happen if measurement errors are autocorrelated. Autocorrelation should be taken into account in the least squares balancing of national accounts. Formulae are presented for the error structure which is likely to arise from extrapolation away from or interpolation between bench-mark observations. Balanced estimates are presented for the UK national accounts, 1920-38, taking into account the autocorrelation likely to have been generated in data construction.

Effective exchange rates 1879–1913

This paper constructs nominal and real multilateral effective exchange rates for Britain, France, Germany and the US during the period of the classical Gold Standard, 1879- 1913. The new data indicate that the major industrial countries saw trend variations in their nominal effective rates, which appear to have been stochastic in nature, and to have reflected a significant amount of trade with non-gold countries. The behaviour of nominal effective rates suggests the existence of common trend patterns across the industrial countries, reflecting similar trading structures in the pre-1914 period. In contrast, the movements of the real effective rates reflect national-specific influences.

Exchange Rates in the Periphery and International Adjustment Under The Gold Standard

The role of exchange rate flexibility in the periphery of the gold standard has been grossly overlooked. This paper builds a new dataset on trade-weighed exchange rates for the period 1870-1913 and finds that large currency movements in periphery countries operating inconvertible paper-money and silver-standard regimes induced major fluctuations in effective exchange rates worldwide. We relate the phenomenon to the international trade structure at the time and show that such currency fluctuations had powerful effects on trade flows. We conclude that nominal exchange rate flexibility in the periphery was an important ingredient of international payments adjustment under the gold standard.

Non-Balanced Growth and Kondratieff Waves in the World Economy, 1850–1913

During 1850–1913 the growth of the world economy was not steady. The observed variations are described with the phrase “G-waves.†In contrast to Kondratieff long waves, G-waves lack a regular periodicity and amplitude.

General Purpose Technologies and Economic Growth: Electricity Diffusion in the Manufacturing Sector Before WWII

This paper evaluates the diffusion of electricity within the context of a GPT perspective. The paper develops a new comparative data set on the usage of electricity in the manufacturing sectors of the US, Britain, France, Germany and Japan and proceeds to evaluate the hypotheses of a productivity slowdown and of a productivity bonus as postulated by many existing GPT models.

Effective Exchange Rates in Japan, 1879-1938

This paper constructs nominal and real multilateral effective exchange rates ffor Japan during the period 1879-1938. Existing studies of Japanese quantitative economic history have tended to use the dollar-yen bilateral exchange rate. A comparison of different indices suggests that the new data offer new insights into Japan’s economic history.

The impact of climatic variations on British economic growth, 1856–1913

The impact of climatic change on the output and productivity long swings of the agricultural sector and the aggregate economy is considered for the period 1850–1913. Various economic explanations for the observed swings are examined and are found to be inadequate. The agro-climatic relationship is found to be of critical importance in accounting for the swings of the agricultural sector and some of the aggregate variations. This relationship is not found to remain constant over time. There is evidence of reduced climatic impact and the non-weather sensitive sectors filtered out much of the impact of climatic change on the aggregate economy during 1890–1913.

British Episodic Economic Growth 1850-1938

This paper argues that non-random measurement errors in the estimates of British Gross Domestic Product makes the compromise estimate a biased indicator of medium-term economic growth. Since the compromise estimate of GDP has been widely accepted and used to describe macroeconomic trends in the British economy this has resulted in descriptions of British economic growth that are best explained as statistical artifacts. This paper questions the existence of an “Edwardian Climacteric”, argues for a rethinking of the myth of the “Great Depression” and offers new insights on inter-war economic growth.