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Suez and Sterling, 1956

  • Adam Klug

    ()

    (Ben-Gurion University)

  • Gregor W. Smith

    ()

    (Queen's University)

Daily data on spot and forward dollar/sterling exchange rates and on Britain's foreign exchange reserves are used to reassess the financial history of the 1956 Suez crisis. We find that support of sterling at its Bretton Woods lower bound lost credibility as early as July. Reserve losses also are consistent with an exchange rate crisis. We provide the first econometric study of foreign exchange market intervention in the pre-convertibility phase of the Bretton Woods system. The Bank of England's interventions reacted strongly both to official sterling and to the transferable sterling market in New York, which suggests that convertibility was a central goal of policy.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1256.pdf
File Function: First version 1999
Download Restriction: no

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1256.

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Length: 37 pages
Date of creation: Feb 1999
Date of revision:
Publication status: forthcoming in Explorations in Economic History
Handle: RePEc:qed:wpaper:1256
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  1. Almekinders, Geert J. & Eijffinger, Sylvester C. W., 1996. "A friction model of daily Bundesbank and Federal Reserve intervention," Journal of Banking & Finance, Elsevier, vol. 20(8), pages 1365-1380, September.
  2. Peter M. Garber & Lars E.O. Svensson, 1994. "The Operation and Collapse of Fixed Exchange Rate Regimes," NBER Working Papers 4971, National Bureau of Economic Research, Inc.
  3. repec:ner:tilbur:urn:nbn:nl:ui:12-73527 is not listed on IDEAS
  4. Eijffinger, S.C.W. & Gruijters, A.P.D., 1989. "On the short term objectives of daily intervention by the Deutsche Bundesbank and the federal reserve system in the U.S. Dollar-Deutsche Mark exchange market," Research Memorandum FEW 393, Tilburg University, School of Economics and Management.
  5. Maurice Obstfeld, 1991. "The Adjustment Mechanism," NBER Working Papers 3943, National Bureau of Economic Research, Inc.
    • Maurice Obstfeld, 1993. "The Adjustment Mechanism," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 201-268 National Bureau of Economic Research, Inc.
  6. Svensson, Lars E O, 1991. "The Simplest Test of Target Zone Credibility," CEPR Discussion Papers 493, C.E.P.R. Discussion Papers.
  7. Maurice Obstfeld & Alan M. Taylor, 1997. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Working Papers 5960, National Bureau of Economic Research, Inc.
  8. Michael Bordo & Anna Schwartz, 1996. "Why clashes between internal and external stability goals end in currency crises, 1797–1994," Open Economies Review, Springer, vol. 7(1), pages 437-468, March.
  9. Alberto Giovannini, 1993. "Bretton Woods and Its Precursors: Rules versus Discretion in the History of International Monetary Regimes," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 109-154 National Bureau of Economic Research, Inc.
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