An Exorbitant Privilege in the First Age of International Financial Integration?

Whether the United Kingdom enjoyed an exorbitant privilege over the period 1871–1914 is analysed with a new dataset. The use of microdata on financial securities sheds light on some issues arising from US studies. A monthly proxy for the British international investment position and estimates of returns are constructed, pointing to an average benefit of 8.3% of GDP, with high variation. The finding supports the claim that exorbitant privilege is partly a general characteristic of the issuer of the global reserve currency. Nonetheless, there are fundamental differences between the two countries: Britain “grossed up” small returns by a large positive position