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Did Monetary Policy Matter? Narrative Evidence from the Classical Gold Standard

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  • Lennard, Jason

    (Department of Economic History, Lund University)

Abstract
This paper investigates the causal effect of monetary policy on economic activity in the United Kingdom between 1890 and 1913. Based on the Romer and Romer (2004) narrative identification approach, I find that following a one percentage point monetary tightening, unemployment rose by 0.8 percentage points, while inflation fell by 2.7 percentage points. In addition, monetary policy shocks accounted for more than a quarter of macroeconomic volatility.

Suggested Citation

  • Lennard, Jason, 2017. "Did Monetary Policy Matter? Narrative Evidence from the Classical Gold Standard," Lund Papers in Economic History 155, Lund University, Department of Economic History.
    • Handle: RePEc:hhs:luekhi:0155
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    References listed on IDEAS

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    Cited by:

    1. Green, Georgina, 2018. "Monetary policy spillovers in the first age of financial globalisation: a narrative VAR approach 1884–1913," Bank of England working papers 718, Bank of England.
    2. Eric Monnet, 2024. "Interest Rates," Springer Books, in: Claude Diebolt & Michael Haupert (ed.), Handbook of Cliometrics, edition 3, pages 1531-1549, Springer.
    3. Bazot, Guillaume & Monnet, Eric & Morys, Matthias, 2019. "Taming the gobal financial cycle: Central banks and the sterilization of capital flows in the first era of globalization," IBF Paper Series 03-19, IBF – Institut für Bank- und Finanzgeschichte / Institute for Banking and Financial History, Frankfurt am Main.
    4. Mitchener, Kris James & Pina, Gonçalo, 2023. "The effects of countercyclical interest rates: Evidence from the classical gold standard," Journal of International Economics, Elsevier, vol. 145(C).
    5. Fredrik N. G. Andersson, 2023. "The quest for economic stability: a study on Swedish stabilisation policies 1873–2019," Scandinavian Economic History Review, Taylor & Francis Journals, vol. 71(2), pages 128-156, May.
    6. Lennard, Jason, 2018. "Did monetary policy matter? Narrative evidence from the classical gold standard," Explorations in Economic History, Elsevier, vol. 68(C), pages 16-36.
    7. Andersson, Fredrik N. G. & Kilman, Josefin, 2021. "A Study of the Romer and Romer Monetary Policy Shocks Using Revised Data," Working Papers 2021:19, Lund University, Department of Economics.
    8. Kenny, Seán & Lennard, Jason & Turner, John D., 2021. "The macroeconomic effects of banking crises: Evidence from the United Kingdom, 1750–1938," Explorations in Economic History, Elsevier, vol. 79(C).
    9. Monnet, Eric & bazot, guillaume & Morys, Matthias, 2019. "Taming the Global Financial Cycle: Central Banks and the Sterilization of Capital Flows in the First Era of Globalization (1891," CEPR Discussion Papers 13895, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    business cycles; gold standard; monetary policy; narrative identification;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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