Scandinavian Working Papers in Economics

Lund Papers in Economic History,
Lund University, Department of Economic History

No 155: Did Monetary Policy Matter? Narrative Evidence from the Classical Gold Standard

Jason Lennard ()
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Jason Lennard: Department of Economic History, Lund University, Postal: Department of Economic History, Lund University, Box 7083, S-220 07 Lund, Sweden

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.

Keywords: business cycles; gold standard; monetary policy; narrative identification

JEL-codes: E31; E32; E52; E58; N13

34 pages, February 28, 2017

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