I estimate a single factor model of Swiss exchange rates during World War I for ﬁve of the primary belligerents: Britain, France, Italy, Germany, and Austria-Hungary. At the outbreak of the war these nations suspended convertibility of their currencies into gold with the promise that after the war each would restore convertibility at the old par. However, once convertibility was suspended, each currency became a state-contingent claim; after the war it would pay oﬀ at (or near) the old par if the country won or pay oﬀ signiﬁcantly less than par (perhaps nothing) if the country lost. The single factor extracted from the ﬁve exchange rates appears to contain information on contemporaries’ expectations about the war’s outcome. Innovations to the single factor are correlated with time series on soldiers killed and wounded and soldiers taken prisoner.
Hall, George J., "Exchange Rates and Casualties During the First World War" (2001). Cowles Foundation Discussion Papers. 1583.