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

Author/Editor:

Eric Monnet ; Damien Puy

Publication Date:

July 24, 2019

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

Series:

Working Paper No. 19/161

Subject:

English

Publication Date:

July 24, 2019

ISBN/ISSN:

9781498326773/1018-5941

Stock No:

WPIEA2019161

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

32

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