Do Old Habits Die Hard? : Central Banks and the Bretton Woods Gold Puzzle

Why did monetary authorities hold large gold reserves under Bretton Woods (1944-1971) when only the US had to? We argue that gold holdings were driven by institutional memory and persistent habits of central bankers. Countries continued to back currency in circulation with gold reserves, following r...

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Main Author: Monnet, Eric
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2019, 2019
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Summary:Why did monetary authorities hold large gold reserves under Bretton Woods (1944-1971) when only the US had to? We argue that gold holdings were driven by institutional memory and persistent habits of central bankers. Countries continued to back currency in circulation with gold reserves, following rules of the pre-WWII gold standard. The longer an institution spent in the gold standard (and the older the policymakers), the stronger the correlation between gold reserves and currency. Since dollars and gold were not perfect substitutes, the Bretton Woods system never worked as expected. Even after radical institutional change, history still shapes the decisions of policymakers
Physical Description:32 p.
ISBN:1498326773
9781498326773