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Table 3 The effect of the gold-points

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

 

Paris

Amsterdam

Berlin

Brussels

Paris

Amsterdam

Berlin

Brussels

Sample

Observations inside gold points

Observations outside gold points

 

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

London investment demand for continental bills of exchange

Intercept (\(\widehat {\alpha }\))

0.01

0.01

0.02

0.01

0.01

0.01

−0.002

0.02

 

(0.002)

(0.002)

(0.002)

(0.004)

(0.01)

(0.005)

(0.01)

(0.01)

i t (\(\widehat {\beta }\))

0.58

0.73

0.77

0.75

0.81

0.69

1.34

0.53

 

(0.05)

(0.07)

(0.06)

(0.12)

(0.17)

(0.16)

(0.11)

(0.16)

Reject (β=1)

***

***

***

**

 

*

***

***

R 2

0.32

0.33

0.36

0.39

0.24

0.23

0.80

0.18

N

1510

1559

1715

582

249

177

43

263

Continental investment demand for London bills of exchange

Intercept (\(\widehat {\alpha }\))

0.003

0.01

0.01

0.0002

0.004

0.01

0.02

0.001

 

(0.0003)

(0.001)

(0.001)

(0.001)

(0.001)

(0.002)

(0.004)

(0.002)

i\(_{t}^{*}\) (\(\widehat {\beta }\))

1.02

0.98

0.96

1.07

0.97

0.95

0.71

1.03

 

(0.02)

(0.02)

(0.02)

(0.02)

(0.06)

(0.09)

(0.09)

(0.05)

Reject (β=1)

  

**

***

  

***

 

R 2

0.87

0.87

0.88

0.90

0.48

0.62

0.73

0.87

N

1520

1581

1728

615

252

178

43

288

  1. Notes: The top and bottom panel of this table report estimates of, respectively, Eq. (4) with dependent variable \(l_{t}-s_{t+m}^{*}\) and Eq. (3) with dependent variable \(l_{t}- s_{t}^{*}\) (expressed as annualised value). The maturity m equals 3-months, that is 90 days or 90 days/7 days per week ≈ 13 weeks. Estimation is by OLS with heteroscedasticity and autocorrelation robust (Newey-West) standard errors with a fixed bandwidth of 13 leads and lags. According to Section “Exchange rates during the gold standard”, the gold-points of \(S_{t}^{*}\) are 25.12 Fcs./ $ and 25.32 Fcs./ $ for France and Belgium, 12.05 Fl./ $ and 12.15 Fl./ $ for the Netherlands, as well as 20.32 M/ $ and 20.53 M/ $ for Germany. The null hypothesis that the interest parity (via long-bill transactions) holds implies that β=1. N denotes the number of observations. Significant deviations from this are indicated by * at the 10% level; ** at the 5% level, and *** at the 1% level