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Market leader: the Austro-Hungarian Bank and the making of foreign exchange intervention, 1896–1913

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  • JOBST, CLEMENS

Abstract

This article challenges the conventional view that the gold standard was stabilized by quasi-automatic central bank intervention and/or private arbitrage whenever the spot exchange rate reached the ‘gold points’. New archival evidence on the central bank of Austria–Hungary between 1896 and 1913 documents the use of sophisticated instruments such as foreign exchange forward and repo (sale-repurchase) contracts and a quest for market dominance both with respect to reserves held and the share in market turnover. The resulting change in the working of the foreign exchange market is shown to have supported the conduct of monetary policy, underlining the importance of market micro structure in the design and conduct of monetary policy. The picture that emerges is that of a much more ‘modern’ approach to exchange rate stabilization during the classical gold standard than is traditionally recognized.

Suggested Citation

  • Jobst, Clemens, 2009. "Market leader: the Austro-Hungarian Bank and the making of foreign exchange intervention, 1896–1913," European Review of Economic History, Cambridge University Press, vol. 13(03), pages 287-318, December.
  • Handle: RePEc:cup:ereveh:v:13:y:2009:i:03:p:287-318_99
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    Cited by:

    1. Richard C.K. Burdekin & Kris James Mitchener & Marc D. Weidenmier, 2012. "Irving Fisher and Price‐Level Targeting in Austria: Was Silver the Answer?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(4), pages 733-750, June.
    2. Doskov, Nikolay & Swinkels, Laurens, 2015. "Empirical evidence on the currency carry trade, 1900–2012," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 370-389.
    3. Guillaume Bazot & Michael D. Bordo & Eric Monnet, 2014. "The Price of Stability: The balance sheet policy of the Banque de France and the Gold Standard (1880-1914)," NBER Working Papers 20554, National Bureau of Economic Research, Inc.
    4. Jobst, Clemens & Ugolini, Stefano, 2014. "The coevolution of money markets and monetary policy, 1815-2008," Working Paper Series 1756, European Central Bank.
    5. Bazot, Guillaume & Bordo, Michael D. & Monnet, Eric, 2016. "International shocks and the balance sheet of the Bank of France under the classical gold standard," Explorations in Economic History, Elsevier, vol. 62(C), pages 87-107.
    6. Morys, Matthias, 2013. "Discount rate policy under the Classical Gold Standard: Core versus periphery (1870s–1914)," Explorations in Economic History, Elsevier, vol. 50(2), pages 205-226.

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