Foreign Exchange Reserve Management in the Nineteenth Century: The National Bank of Belgium in the 1850s

One of the most interesting aspects of the monetary action of peripheral countries during the gold standard era consists of their widespread adoption of foreign exchange policies, which turned the international monetary system into a de facto gold exchange standard by the end of the nineteenth century1 As much as the current one, the first wave of globalization was thus accompanied by increasing accumulation of foreign reserves. This striking parallelism is fascinating, and economists might be legitimately tempted to look for insights from the past. There are at least two dimensions along which such an exercise can be performed. One dimension concerns the motives for accumulation and the relative role of reserve currencies in the structure of the international monetary system: for instance, which lessons for the dollar’s current position might be drawn from sterling’s past performance? These questions, which bear a great deal of relevance from a macroeconomic viewpoint, have already started to be approached by the literature.2 An alternative dimension concerns the practicalities of the accumulation process: what were reserves made of in the nineteenth century, how were they actually managed at the time, and do the differences between now and then have something to teach us? These questions, which are particularly interesting from a microeconomic viewpoint, have never been addressed up to now: as a matter of fact, very few elements about the practical aspects of foreign exchange policy have emerged so far.3 Given the relatively low level of disclosure associated with these activities, details remain largely unknown even for the case of today’s central banks; concerning the past, most crucial elements are still buried in archives — if not lost forever.