The substantial literature on fixed metal standards is strangely sparse on research into the geography of such standards. In Discussion Paper No. 1050, Research Fellow Barry Eichengreen and Research Affiliate Marc Flandreau set out to fill this gap, examining the move to gold and the variety of transition strategies. The authors find that whether a country with a currency convertible into specie operated a gold, silver or bimetallic standard in the mid-eighteenth century depended not so much on whether it was rich or poor as on the monetary standard of the foreign country or countries to which its transactions were linked. When it came to the distinction between specie convertibility and inconvertibility, however, domestic economic conditions came into play. In particular, there was a strong correlation between economic development, as proxied by the level of per capita incomes, and possession of a convertible currency.

The analysis suggests, in contrast to most earlier core-periphery distinctions, that the pre-war system had several cores and several peripheries. The classical gold standard did not revolve simply around the City of London; rather, it evolved out of the British, French and German zones of economic influence and consequently had several centres (London, Paris and Berlin) corresponding to several peripheries. Last, it is argued that the gold standard was less a dramatic departure from the status quo ante than an attempt to restore the monetary stability that had prevailed before 1870. It was a way to solve problems, including exchange rate instability and disruptions to international capital markets, caused by the collapse of the bimetallic system. And it was a response to the failure of countries to agree on steps to sustain international bimetallism.

The Geography of the Gold Standard
Barry Eichengreen and Marc Flandreau

Discussion Paper No. 1050, October 1994 (IM)