Published online by Cambridge University Press: 16 May 2014
Using an event study approach, we find the announcement by the Bank of France in 1907 to accelerate gold payments directly for U.S. crops is associated with the ultimate upturn in U.S. equity prices. Spillover to the French financial markets accompanied the Regents’ decision to release sterilized reserves, thereby arresting the drainage of coin in French circulation. Counterfactual analysis shows that the facility alone would have been unlikely to end the crisis. Investors may have revised equity expectations upward, recognizing that the acceleration in reliable seasonal gold flows would relieve monetary stringency.
The authors would like to thank Vincent Bignon, Michael Edelstein, Marc Flandreau, Christopher Hanes, Eric Hilt, John A. James, Iuliana Ismaliescu, Naomi Lamoreaux, Eric Monnet, Larry Neal, Joseph Salerno, George David Smith, Richard Sylla, Ellis Tallman, Eugene White, Berry Wilson, two anonymous referees, and attendees at the 2012 NBER Summer Institute, the 2012 Infiniti Conference at Trinity College, Dublin, Ireland, the Economic History Association Conference 2012, Economics Seminar at SUNY Binghamton 2012, the Midwest Economics Association Conference 2013, presentation at SUNY Oswego 2013, and the Economics History Seminar at Columbia University 2013. All errors and omissions are the authors' alone.
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