EXCHANGE-RATE CRISES WITH DOMESTIC BANK RUNS - EVIDENCE FROM THE 1890S

The Sherman Silver Purchase Act of 1890 led to inflation fears and a s eries of flights from the dollar. In spite of these runs, the dollar w as never devalued. The question remains: why? Grilli (1990) argues tha t it was the Treasury's ability to borrow that prevented collapse. Whi le this explains why the gold standard endured from 1894 to 1896, it d oes not explain why there was no successful attack before that time. T he paper argues that the gold standard endured during 1893 because an internal drain of commerical bank funds stopped the external drain. A revised series of collapse probabilities is provided and shown to be z ero during the internal drain. (JEL F3, G2). Copyright (C) 1996 Elsevi er Science Ltd