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The origins of foreign exchange policy: the National Bank of Belgium and the quest for monetary independence in the 1850s

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  • Stefano Ugolini

Abstract

The monetary policy trilemma maintains that financial openness, fixed exchange rates, and monetary independence cannot coexist. Yet, in the 1850s, Belgium violated this prediction. Through a study of nineteenth-century monetary policy implementation, this article investigates the reasons for such success. This was mainly built on the stabilisation of central bank liquidity, not of exchange rates as assumed by the target-zone literature. Other ingredients included: the role of circulating bullion as a buffer for central bank reserves, the banking system's structural liquidity deficit towards the central bank, and the central bank's size relative to the money market. Copyright , Oxford University Press.

Suggested Citation

  • Stefano Ugolini, 2012. "The origins of foreign exchange policy: the National Bank of Belgium and the quest for monetary independence in the 1850s," European Review of Economic History, European Historical Economics Society, vol. 16(1), pages 51-73, February.
    • Handle: RePEc:oup:ereveh:v:16:y:2012:i:1:p:51-73
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    File URL: http://hdl.handle.net/10.1093/ereh/her005
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    Cited by:

    1. Di Martino, Paolo & Bagliano, Fabio C., 2025. "Monetary policy at the periphery during the Classical Gold Standard: Italy (1894–1913)," Explorations in Economic History, Elsevier, vol. 97(C).
    2. Marc Deloof & Abe Jong & Wilco Legierse, 2023. "Going public: evidence from stock and bond IPOs in Belgium, 1839–1935," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 17(3), pages 433-466, September.
    3. Jobst, Clemens & Ugolini, Stefano, 2014. "The coevolution of money markets and monetary policy, 1815-2008," Working Paper Series 1756, European Central Bank.
    4. Fliers, Philip T. & Colvin, Christopher L., 2022. "Going Dutch: monetary policy in the Netherlands during the interwar gold standard, 1925–1936," Financial History Review, Cambridge University Press, vol. 29(2), pages 121-151, August.
    5. Klovland, Jan Tore & Øksendal, Lars Fredrik, 2013. "The decentralised central bank: regional bank rate autonomy in Norway, 1850-1892," Discussion Paper Series in Economics 6/2013, Norwegian School of Economics, Department of Economics.
    6. Stefano Ugolini, 2011. "What do we really know about the long-term evolution of central banking? Evidence from the past, insights for the present," Working Paper 2011/15, Norges Bank.
    7. Stefano Ugolini, 2011. "Foreign exchange reserve management in the 19th century: The National Bank of Belgium in the 1850s," Working Paper 2011/07, Norges Bank.
    8. Chen, Yao & Ward, Felix, 2019. "When do fixed exchange rates work? Evidence from the Gold Standard," Journal of International Economics, Elsevier, vol. 116(C), pages 158-172.
    9. Stefano Ugolini, 2013. "The Bank of England as the World Gold Market Maker during the Classical Gold Standard Era, 1889–1910," Palgrave Macmillan Books, in: Sandra Bott (ed.), The Global Gold Market and the International Monetary System from the late 19th Century to the Present, chapter 3, pages 64-87, Palgrave Macmillan.
    10. 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.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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