samlet årgang - Økonomisk Institut - Københavns Universitet

INTEREST-RATE DEVELOPMENT IN DENMARK 1875-2003 – A SURVEY 155
25
20
15
10
5
Government bond yield
Yield on mortage-credit bonds
0
1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005
Figure 2. Long-term interest rates 1875-2003, per cent per annum.
Source: Chart 1b in Abildgren (2005).
in the international fixed-exchange-rate Gold Standard system as well. The system
was characterised by free movements of capital (including free private import and
export of gold in coins and bars). The price level in Denmark was roughly unchanged
in the period 1875-1913, and the long-term interest-rate spreads between Denmark
and other countries were fairly stable. 3 The Danish government bond yield reached a
post-1875 all time low of 3.43 per cent per annum in 1895.
The period 1914-1945 saw rather frequent changes in the monetary regime. World
War I de facto terminated the Scandinavian Currency Union and the international
Classical Gold Standard, and ended free cross-border capital movements. After the
War Denmark and its main trading partners gradually returned to the Gold Standard
and restored the free cross-border movements of capital, 4 but the system collapsed
again after a few years when the UK went off gold in September 1931. Denmark left
the Gold Standard later within the same month, and in 1932 a comprehensive exchangecontrol
system was introduced. Apart from a major Danish devaluation in 1933, the
Danish krone was pegged rather closely to the British pound for most of the remaining
period until the outbreak of World War II. The average Danish inflation rate in the period
1914-1945 was 3.8 per cent, and inflation rates were highly volatile with 10 years
of deflation during the period 1921-1933 and a post-1875 all time high rate of inflation
3. Abildgren (2005) contains charts with the short-term and long-term Danish interest-rate spread vis-à-vis
Germany, UK, USA, Norway and Sweden since 1875.
4. In January 1927 the Danish krone returned to the Gold Standard at the pre-war parity and the Danish
ban on exports of gold in coins and bars was removed vis-à-vis countries with gold-encashment of their
currencies.