This paper investigates the causal effect of monetary policy on economic activity in the United Kingdom between 1890 and 1913. Based on the Romer and Romer (2004) narrative identification approach, I find that following a one percentage point monetary tightening, unemployment rose by 0.8 percentage points, while inflation fell by 2.7 percentage points. In addition, monetary policy shocks accounted for more than a quarter of macroeconomic volatility.
|Name||Lund Papers in Economic History: General Issues|
|Publisher||Department of Economic History, Lund University|
- business cycles
- gold standard
- monetary policy
- narrative identification