Research

Work in Progress:

Abstract: The rise of the classical gold standard has often been explained by network externalities. In particular, gravity regressions have consistently shown large trade gains for countries on the same monetary regime (especially gold). However, causality probably runs in both directions, since more open economies would have a greater incentive to adopt stable exchange rate regimes, especially if they traded more with other gold countries. This raises an endogeneity issue for which conventional identification methods are not suitable. This paper uses empirical network analysis to model the co-evolution of trade and exchange rate regimes. Simulations of this evolution indicate the presence of asymmetric effects. We find strong evidence that the monetary regimes of trade partners shaped countries' decisions about their monetary standards. In contrast, countries' monetary choices did not affect the geography of their trade partners.


Abstract: This paper examines the effect of countries’ access to the London bill market on bilateral trade flows during the first wave of globalisation. The channel explored stresses how financial intermediaries alleviated exporter’s barrier to trade by providing working capital and insuring against export risks. Using an augmented gravity model, I test this channel by assessing whether countries’ access to the London bill market impacted positively their bilateral trade. To do so, I constructed a unique granular dataset, comprising 27.064 sterling bills of exchange for the year 1878 for which I added Accominotti et al. (2021)’s data for the period 1906. I identify, for each country-pair, the number of firms having access to the London bill market, and I evaluate its impact on bilateral trade flows. While a significant effect is demonstrated for the year 1878, my results highlight a sharp decrease between both years. This can be explained by the extensive and intensive margin effect of bill market access on trade. While, during the first years of globalisation, the access of new drawers to the London bill market highly impacted trade as the financial structure was in expansion, once this financial structure was established, trade was affected overall by the intensive part. A second factor lies in the growing importance of finance bills in the market. Differentiating by type of acceptors, I showcase that these results remain similar regardless of the intermediary type (i.e., financial or non-financial firm), despite their apparent diverging market structure.


Publication:

Abstract: In theory credit booms, and the crises associated to these booms, should occur more frequently in Fiat monetary regimes than in regimes, such as the Gold Standard, where money creation is constrained. In this note, we investigate whether the importance of the credit boom factor, as an early warning indicator (EWI) of systemic financial crises, varies across monetary regimes for a sample of 17 developed countries over the 1870-2016 period. We find no evidence of a difference between monetary regime for credit-driven crises and this both for the occurrence and the severity of crises.