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Lawren Broz - Political Economcy of the Commitment to the Gold Standard

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McGill University
Political Science
POLI 354
Mark Brawley

POLI 354Approaches to International Political Economy 1 Lawrence Broz The Political Economy of Commitment to the Gold Standard 1 Introduction Gold standard a rulebased monetary regime that stabilized exchange rates and lent credibility and predictability to governments macroeconomic policies 3Appeared in the formation of the first integrated world economy 18001914Industrialized countries adopted the gold standardDeveloping states never managed to adapt yet benefits were biggest for themSome states adopted this policy only when it was favorable to do so Authors main contentionsThe relationship between political instability and adherence to goldThe effects of democracys extent on gold standard performanceThe pressures from special interestsTake a look at the tables at the end of the essay2 The Rise of the Gold StandardBritain was one of few countries to have used the gold standard prior to 18701850s Australia Canada also join the standardPortugal briefly joins in 1854 but moves to paper fiat standard in 1891By the 1880s most developed Atlantic economies were on gold 6The majority of gold standard adopters were states in the North Atlantic core thereby limiting the benefits of a gold standard price exchange rate stability to that regionCountries not belonging to the industrialized core suffered higher inflation and exchange rate variability with Italy Spain and Portugal as the exceptions 2c The Gold Standard as a Commitment Mechanism The gold standard is seen as a way to judge a states credibility in the long runHowever this argument is built on a
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