EVIDENCE OF PURCHASING POWER PARITY IN SILVER‐BACKED MEXICO AND INDIA

This paper examines whether the theory of purchasing power parity (PPP) existed between Mexico and India for the period 1886–1910. It finds that despite not having a known trade relationship, PPP did hold. The explanation lies in the fact that these very different countries adhered to the silver standard far longer than most others – India through to 1893 and Mexico until 1905. The economic consequences of this adherence exposed both countries to similar international currency fluctuations that also provoked similar policy reactions within each country.