Interest-parity conditions during the era of the classical gold standard (1880–1914)—evidence from the investment demand for bills of exchange in Europe

Swiss Journal of Economics and Statistics

Table 2 Results: Interest parity via long-bills of exchange

	Continental investment demand for London bills of exchange				London investment demand for continental bills of exchange
	Paris	Amsterdam	Berlin	Brussels	London on
	on London				Paris	Amsterdam	Berlin	Brussels
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Intercept \(\left (\widehat {\alpha }\right)\)	0.003	0.01	0.01	0.001	0.01	0.01	0.01	0.01
	(0.0004)	(0.001)	(0.001)	(0.001)	(0.002)	(0.002)	(0.002)	(0.003)
i \(_{t}^{*} \left (\widehat {\beta }\right)\)	1.01	0.97	0.96	1.05
	(0.02)	(0.02)	(0.02)	(0.02)
i \(_{t} \left (\widehat {\beta }\right)\)					0.62	0.75	0.81	0.75
					(0.05)	(0.07)	(0.06)	(0.09)
Reject (β=1)			**	***	***	***	***	***
R ²	0.81	0.84	0.87	0.90	0.30	0.33	0.39	0.37
N	1772	1759	1771	903	1759	1749	1759	890

Notes: This table reports estimates of Eq. (3) with dependent variable \(l_{t}-s_{t}^{*}\) and (4) with dependent variable \(l_{t}-s_{t+m}^{*}\) (expressed as annualised value). Estimation is by OLS with heteroscedasticity and autocorrelation robust (Newey-West) standard errors with a fixed bandwidth of 13 leads and lags. The null hypothesis that the interest parity (via long-bill transactions) holds implies that β=1N the number of observations Significant deviations from this are indicated by ** at the 5% level, and *** at the 1% level