We ask whether developing countries reap credibility gains from submitting policy to a strict monetary rule. We look at the gold standard era, 1880–1914, to test whether adoption of a rule-based monetary framework such as the gold standard increased policy credibility, focusing on sixty independent and colonial borrowers in the London market. We challenge the traditional view that gold standard adherence was a credible commitment mechanism rewarded by financial markets with lower borrowing costs. We demonstrate that for the poor periphery-where policy credibility is a particularly acute problem-the market looked behind "the thin film of gold".
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