Gardner, Leigh A.
The rise and fall of sterling in Liberia, 1870-1943.
In: Modern and comparative economic history seminar, 15th November 2012, London School of Economics and Political Science.
Recent research on exchange rate regime choice in developing countries has revealed that a range of factors, from weak fiscal institutions to the inability to borrow in their own currencies, limits the range of options available to them. This paper uses the case of Liberia to illustrate that new states in Africa during the gold standard era faced similar limitations, even in the absence of formal colonial rule. The rapid depreciation of the Liberian dollar in the nineteenth century led to the adoption of sterling as a medium of exchange and store of value. This initially made it easier for Liberia to service its sterling-denominated debt and for Liberians to purchase imports from Britain. However, as economic relations with the United States deepened during the twentieth century, instability in the pound-dollar exchange rate created serious dislocations in the Liberian economy, ultimately leading the official adoption of the U.S. dollar in 1943. The story of Liberia illustrates the long-standing challenges of globalization for peripheral economies and suggests the need for a reassessment of the origins and impact of colonial monetary regimes.
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