FIN-03-027 |
NYU Stern School of Business |
October 2003
William L. Silber
ABSTRACT
The outbreak of World War I shut the New York Stock Exchange for more than four
months. The conventional explanation maintains that the closure prevented a
collapse in stock prices that threatened a repetition of the Panic of 1907.
This paper shows that the Wilson Administration encouraged the suspension of
trading to pave the way for launching the Federal Reserve System, which was
in the process of being born. Closing the Exchange helped to forestall an outflow
of gold. Federal Reserve insiders considered an adequate stock of gold crucial
to the success of the new monetary system.
JEL Classification: E42, N22, E58 Keywords: Federal Reserve, Gold Standard,
Financial Crises, World War I
William L. Silber
Institution: Stern School of Business, New York University
Email: wsilber@stern.nyu.edu
Phone: (212) 998-0714
Fax: (212) 995-4216
Home Page: http://www.stern.nyu.edu/~wsilber/
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