Latin America’s experience with the gold standard, 1867-1914: managing the external constraint without a central bank

Latin America’s experience with the Classical Gold Standard was different from Europe’s in that the gold link was managed by commercial banks and not central banks. We provide econometric evidence in support of Ford (1989)’s famous dictum on Argentina that this made macroeconomic adjustment more difficult, heightening the tension between the external and the internal constraint. Drawing on the LA-6 economies plus early developer Uruguay, we also outline similarities and differences between their experiences, and explain their move away from a privately-run gold standard towards a banking structure more akin to the European experience in the early 20th century.