“Money doctors and their reform proposals for China reconsidered, 1903–29,” Oxford Economic Papers, 68 (4), pp. 1039-1061.

Abstract:

In this paper we provide a quantitative evaluation of foreign financial advising, taking China’s currency reform proposals as an example. Between 1903 and 1929, three Western financial experts proposed a gold (-exchange) standard to China, which at that time was on a silver standard. Using counterfactual simulation, we find that: (1) a gold (-exchange) standard would not have brought price stability to China; (2) and it could have even worsened global deflation during the beginning years of the Great Depression.

 

 

“A silver lifeboat, not silver fetters: Why and how the silver standard insulated China from the 1929 Great Depression,” Journal of Applied Econometrics, 31, pp. 403-419.

With Cheng-chung Lai

Abstract:

We use counterfactual simulations based on an estimated dynamic stochastic general equilibrium model to demonstrate why China was affected less than other major countries during the first two years of the Great Depression. We show that being on a silver standard insulated China from the adverse consequences of the Great Depression by saving the country both from a tightening of monetary conditions and from a detrimental internal deflation. Without the insulation of the silver standard, China might have suffered from a cumulative output loss of between 11% and 23%, and its inflation might have become deflation.

 

 

“Dilemma of the Silver Standard Economies: The Case of China,” Southern Economic Journal, October, 81 (2), pp. 519-534.

Abstract:

Exchange rate commitments implied in the silver standard originally anchored China’s monetary policy and the inflation rate in the early republican period. It was believed that China’s free silver standard acted as a natural check on the excessive issuing of notes by warlords and local governments. This consensus view, however, overlooks the fact that the silver standard was inherently unstable because it left no room for monetary policy to stabilize output and inflation. This article employs a formal structural model to show that a fiat currency unlinked to fluctuations in the price of silver that allows government to implement self-adjusting monetary policies would further stabilize China’s output and inflation.

 

 

“Silver Fetters? The Rise and Fall of Chinese Price Level 1928-34” Explorations in Economic History, 50, pp. 446-462.

With Cheng-chung Lai

Abstract:

We show how the silver standard transmitted world silver price fluctuations into China and made the  Chinese price level closely linked to the world silver price. Inflation was transmitted between 1929 and 1931 when the world silver price was falling; while deflation was transmitted during 1932 and 1934 when the world silver price was rising. Using micro-level evidence and counterfactual simulations, we show that the exchange rate was the main shock transmission channel, and silver stocks played an insignificant role.

 

 

“Equilibrium and adjustment of exchange rates in the Chinese silver standard economy, 1928-35,” Cliometrica, 7 (1), pp. 87-98.

With Cheng-chung Lai and Joshua Jr-shiang Gau

Abstract:

We examine the equilibrium and adjustment of exchange rates in the Chinese silver standard economy, 1928–1935. We find a robust long-run relationship between the Chinese dollar exchange rate and the metallic value of the Chinese dollar. The deviation from the equilibrium is short-lived and is quickly eliminated by arbitrage activities. We also find that governmental measures to limit free silver flows can disrupt this equilibrium relationship.

 

 

“Professor Jeremiah Jenks of Cornell University and the 1903 Chinese Monetary Reform,” Hitotsubashi Journal of Economics, 50 (1), pp. 35-46.

With Lai, Cheng-chung, Joshua Jr-shiang Gau

Abstract:

The Boxer uprising in China (1900) killed quite a number of foreigners and missionaries, which induced the armies of eight Western powers to invade China and they imposed an indemnity of 400 million silver taels. The international silver price around the 1900s was slumping, and these indemnity-treaty powers (e.g. France, UK, Germany, and Belgium) strongly wished China to establish a silver monetary system that would be maintained at parity with gold. Professor Jeremiah Jenks (1856-1929) of Cornell University was mandated to establish a gold-exchange standard for China. This paper begins with Jenks’s life and work and the background of his mission to China. Section 2 presents the basic principle of this reform project and its specific designs. Section 3 assesses reactions and criticisms on Jenks’s proposal. Possible arbitrage activities between gold and silver are analyzed in Sections 4 in order to evaluate the sustainability of Jenks’s system. We conclude that: (1) Jenks’s new system might have been stable in 1904-16 and 1928-30; (2) technically speaking, this was a remarkable design.