The Efficiency of the Dollar-Sterling Gold Standard, 1890-1908

Abstract

The gold standard in 1890-1908 period was efficient by any criterion: the number of gold point violations was small; violations did not persist; gold movements occurred in the predictable, profitable, direction in response to violations; and the mean absolute exchange rate (for 1881-1900) was at exactly half the average of the gold points. The actions of the Bank of England and U.S. Treasury in manipulating gold points were consistent with the "rules of the game" and in fact facilitated the efficiency of the gold standard. In contrast, the operations of banking syndicates were of a nature to generate inefficiencies, but the evidence is that they did not have this effect.