Foreign exchange reserve management in the 19th century: The National Bank of Belgium in the 1850s
AbstractAs well as the current one, the wave of globalization culminated in 1913 was marked by increasing accumulation of foreign exchange reserves. But what did ‘reserves’ mean in the past, how were they managed, and how much relevant are the differences between then and now? This paper is the first attempt to investigate 19th-century reserve management from central banks’ perspective. Building on a significant case study (the National Bank of Belgium, i.e. the ‘inventor’ of foreign exchange policy, in the 1850s), it shows that risk management practices in the past differed considerably from nowadays. The structure of the international monetary system allowed central banks to minimize financial risk, while poor institutional design enhanced operational risk: this is in stark contrast with the present situation, in which operational risk has been minimized and financial risk has considerably increased. Yet 19th-century reserve management was apparently not conducive to major losses for central banks, while the opposite seems to have been the case in the 21st century.
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Bibliographic InfoPaper provided by Norges Bank in its series Working Paper with number 2011/07.
Length: 28 pages
Date of creation: 05 Jul 2011
Date of revision:
Note: First version:
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Foreign exchange reserves; international monetary systems; central banking; risk management;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
- NEP-CBA-2011-07-13 (Central Banking)
- NEP-HIS-2011-07-13 (Business, Economic & Financial History)
- NEP-IFN-2011-07-13 (International Finance)
- NEP-MAC-2011-07-13 (Macroeconomics)
- NEP-MON-2011-07-13 (Monetary Economics)
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