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- Title
The European Periphery in the Era of the Gold Standard: The Case of the Spanish Peseta and the Pound Sterling from 1883 to 1931.
- Authors
Gadea, María Dolores; Sabaté, Marcela
- Abstract
This paper analyses the relationship between the Spanish peseta, the currency of a peripheral country, and the pound sterling, the central currency of the gold standard. From 1883, when Spain suspended metallic convertibility, until 1931, when Great Britain definitively abandoned gold, the peseta was a fiat currency with a flexible exchange rate regime. Our results confirm, first, long-run PPP hypothesis compliance for the peseta/pound sterling rate during the period. Secondly, we illustrate how the inclusion of peripheral variables (erratic trade and financial risk), significantly improves the short-run adjustment to the PPP hypothesis. It appears that the floating regime thus helped Spain to smooth out the required external adjustment process resulting from balance of payments shocks.
- Subjects
FOREIGN exchange; PESETA; POUND sterling; MONEY; FOREIGN exchange rates; INTERNATIONAL finance; BALANCE of payments
- Publication
Open Economies Review, 2004, Vol 15, Issue 1, p63
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1023/B:OPEN.0000009426.38655.f2