Replication Data for: Central banks and sovereign debt credibility before 1914

Lending to governments is risky, as creditors may have little recourse in the event of default. Research shows that historic and contemporary central banks alike enhance sovereign credibility and reduce borrowing costs, but the reasons why are debated. A constraints view, tied to pre-WWI central banking, argues that central banks impose fiscal discipline by raising default costs. An information view, linked to modern central banking, suggests a central bank’s design signals credibility, especially its independence. Using a formal model, I devise a test grounded in the tasks assigned to historical central banks to adjudicate between these views. Empirical results unequivocally support the information view. The results imply that: (1) central banks signaled sovereign credibility before 1914 and (2) what constitutes a positive signal of sovereign credibility is conditioned by the priorities of contemporaneous market actors, not attributes of political institutions.