WAS LONDON THE CONDUCTOR OF THE INTERNATIONAL ORCHESTRA OR JUST THE TRIANGLE PLAYER? AN EMPIRICAL ANALYSIS OF ASYMMETRIES IN INTEREST RATE BEHA VIOUR DURING THE CLASSICAL GOLD STANDARD, 1876–1913

Abstract

A bstract This paper analyses the interrelationships of official and private discount rates between seven European financial centres and in particular between London, Berlin, and Paris. Looking at the days and directions of all official discount rate changes in the seven centres, pairwise leads and lags are analysed. As to private discount rates, which seem to be stationary, correlations and coherencies are measured, multivariate Granger‐causality tests are performed and impulse response functions are calculated. The paper shows that there are strong mutual feedbacks between interest rates in London, Paris, and Berlin, suggesting that the classical gold standard was a decentralized, multipolar system.