International currency speculation,market stability and efficiency in the 1920s: A time series approach

Vector autoregressive time-series modelling methodology is applied to the 1920s exchange-rate data for France, Germany, the U.S.A., Belgium, and Holland. A Wald test is found to conclusively reject the hypothesis that the forward rate is an unbiased predictor of the future spot rate for all five currencies. Details are given of various external shocks that may have influenced the exchange rates and these are dealt with by a set of dummy variables. The data series exhibit some rapid depreciations and nonstationarities of interest to econometricians and time series analysts.