Campus Units

Economics

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

2010

Journal or Book Title

Journal of Monetary Economics

Volume

57

Issue

8

First Page or Article ID Number

1026

Last Page

1037

DOI

10.1016/j.jmoneco.2010.10.003

Abstract

The two leading explanations for the counterintuitive behavior of interest rates during the Greenback Era (1862–1878) – the resumption expectations model of Calomiris (1988) and the capital flow argument of Friedman and Schwartz (1963) – are inconsistent with each other in terms of their treatment of financial arbitrage. A methodology to identify unexploited arbitrage opportunities in financial data is proposed. Observable returns strongly suggest that the money market of the Greenback Era did not systematically admit arbitrage, except possibly around the times of the Gold Corner of 1869 and the Panic of 1873, which implies that Calomiris provides a more plausible explanation.

Comments

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Monetary Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Monetary Economics, [57, 8, (2010)] doi:10.1016/j.jmoneco.2010.10.003

Copyright Owner

Elsevier Ltd.

Language

en

File Format

application/pdf

Published Version

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