Book contents
- Frontmatter
- Contents
- Acknowledgements
- Note on the text
- 1 Epochs in economic history, 1919–39
- 2 The exchange rate regime and UK economic performance during the 1920s
- 3 Unemployment, 1919–38
- 4 Economic fluctuations, 1919–38
- 5 Exchange rate regimes and economic recovery in the 1930s
- 6 Protection and economic revival in the 1930s
- 7 Policy lessons of the interwar period
- Glossary
- Bibliography
- Index of names
- Index of subjects
2 - The exchange rate regime and UK economic performance during the 1920s
Published online by Cambridge University Press: 04 December 2009
- Frontmatter
- Contents
- Acknowledgements
- Note on the text
- 1 Epochs in economic history, 1919–39
- 2 The exchange rate regime and UK economic performance during the 1920s
- 3 Unemployment, 1919–38
- 4 Economic fluctuations, 1919–38
- 5 Exchange rate regimes and economic recovery in the 1930s
- 6 Protection and economic revival in the 1930s
- 7 Policy lessons of the interwar period
- Glossary
- Bibliography
- Index of names
- Index of subjects
Summary
INTRODUCTION
During the 1920s UK economic performance lagged behind that of many other countries in the world economy. Much of the recent literature has attempted to explain this outcome in terms of the macroeconomic policy regime resulting from the return to a fixed exchange rate at the pre-war gold standard parity (Moggridge, 1972; Broadberry, 1986; Eichengreen, 1992).
During 1870–1914 the value of the Pound was fixed relative to gold. America, France and Germany also sustained a fixed gold value for their currencies for most of this period (1879–1914), implying a fixed nominal exchange rate across the leading industrial economies. A restricted version of this system continued during the First World War: however, the large trade deficit and the low level of gold reserves in 1919 resulted in the formal abandonment of the gold standard by the UK in March of that year. Nevertheless, this significant change of policy was seen as a transitory measure: the aim of the government was to restore the gold standard to the pre-1913 parity as quickly as possible. This was achieved in the budget of 1925. There is now extensive evidence to suggest that the decision to return to the pre-1913 gold parity resulted in an overvaluation of the real exchange rate during the 1920s.
- Type
- Chapter
- Information
- Themes in Macroeconomic HistoryThe UK Economy 1919–1939, pp. 24 - 52Publisher: Cambridge University PressPrint publication year: 1996