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Foreign Interest Rates in American Financial Markets: A Revised Series of Dollar-Sterling Exchange Rates, 1833–1900

Published online by Cambridge University Press:  11 May 2010

Edwin J. Perkins
Edwin J. Perkins
Affiliation:
University of Southern California
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Extract

This paper offers a revised series of nineteenth-century Anglo-American foreign exchange rates. The new series is based partly on the reinterpretation of data presented earlier by other scholars and partly on a recently rediscovered source of continuous information on sterling-dollar rates after 1869. The pioneering work in this area was done by Lance Davis and Jonathan Hughes. They published in 1960 a quarterly dollar-sterling exchange rate series (1835 to 1895) based on the actual prices paid for approximately 3,000 sterling bills by Nathan Trotter's Philadelphia-based metals importing firm.

Type
Articles
Information
The Journal of Economic History , Volume 38 , Issue 2 , June 1978 , pp. 392 - 417
Copyright
Copyright © The Economic History Association 1978

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References

1 Davis, Lance and Hughes, J. R. T., “A Dollar-Sterling Exchange, 1803–1894.” Economic History Review, 12 (1960), 52–78Google Scholar. For information on the firm itself see Tooker, Elva, Nathan Trotter, Philadelphia Merchant (Cambridge, Mass., 1955)CrossRefGoogle Scholar.

2 Perkins, Edwin J., Financing Anglo-American Trade: The House of Brown, 1800–1880 (Cambridge, Mass., 1975)CrossRefGoogle Scholar.

3 Complete sets of the Financial Review are apparently rare; the only one known to the author resides in the U.C.-Berkeley library. Johns Hopkins and the Library of Congress have some volumes but not the entire series beginning in 1871.

4 Walton, L. E., Foreign Trade and Foreign Exchange: Their Theory and Practice (London, 1967), p. 65Google Scholar.

5 Shaterian, William, Export-Import Banking: The Documents and Financial Operations of Foreign Trade (New York, 1956), p. 248Google Scholar.

6 Whitaker, Albert, Foreign Exchange (New York, 1933), p. 219Google Scholar.

7 Cross, Ira B., Domestic and Foreign Exchange (New York, 1923), pp. 347–69Google Scholar. Cross's analysis is more thorough and complicated than presented here; it is the logical starting point for anyone contemplating further research on the subject.

8 Ibid., p. 352.

9 Ibid., p. 356.

10 Alexander Brown & Sons Papers, Library of Congress. The data come from daily and weekly reports to the parent firm's London office.

11 English rates are from Clapham, John, The Bank of England: A History (Cambridge, England, 1944)Google Scholar, Appendix B, and Homer, Sidney, A History of Interest Rates (New Brunswick, N.J., 1963), pp. 181–215Google Scholar. The source on American rates is Macaulay, F. R., The Movements of Interest Rates … since 1856 (New York: NBER, 1938)Google Scholar.

12 Perkins, Financing, pp. 148–49.

13 Brown Bros. & Co. to T. Curtis, 11 February 1858, Brown Brothers & Co. Papers, New York Public Library.

14 Ibid., 5 August 1858.

15 George Brown to Brown, Shipley & Co., 22 August 1840, Alexander Brown:and (Sons Papers.

16 William Graham to Brown Bros. & Co., 14 May 1859, Alexander Brown & Sons Papers.

17 Davis and Hughes, “Dollar-Sterling Exchange,” p. 53.

18 Ibid., p. 59.

19 In the course of my work on this article, I learned that I was by no means the first scholar to question the Davis-Hughes assumption about the proper interest rate series for their model. Professor Peter Lindert argues that by using American interest rate series, Davis and Hughes produced not a spot rate for sterling in the United States but rather a hypothetical forward rate for pounds had a forward market actually existed throughout the nineteenth century. (Private correspondence with the author, 17 May 1971.)