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Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913
Eugene Canjels, Gauri Prakash-Canjels and Alan M. Taylor
The Review of Economics and Statistics
Vol. 86, No. 4 (Nov., 2004), pp. 868-882
Published by: The MIT Press
Stable URL: http://www.jstor.org/stable/40042975
Page Count: 15
You can always find the topics here!Topics: Exchange rates, Gold points, Arbitrage, Point estimators, Imports, Gold standard, Marginal costs, Economic models, Statistical models, Shipments
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A major question in the literature on the classical gold standard concerns the efficiency of international arbitrage. Authors have examined efficiency by looking at the spread of the gold points, gold point violations, or the flow of gold, or by tests of various asset market criteria, including speculative efficiency and interest arbitrage. These studies have suffered from many limitations, both methodological and empirical. We offer a new methodology for measuring market integration based on nonlinear theoretical models and threshold autoregressions. We also compile a new, high-frequency series of continuous daily data from 1879 to 1913. We can derive reasonable econometric estimates of the implied gold points and price dynamics. The changes in these measures over time provide an insight into the evolution of market integration.
The Review of Economics and Statistics © 2004 The MIT Press