Do Old Habits Die Hard? Central Banks and the Bretton Woods Gold Puzzle

Eric Monnet and Damien Puy

No 2019/161, IMF Working Papers from International Monetary Fund

Abstract: Why did monetary authorities hold large gold reserves under Bretton Woods (1944–1971) when only the US had to? We argue that gold holdings were driven by institutional memory and persistent habits of central bankers. Countries continued to back currency in circulation with gold reserves, following rules of the pre-WWII gold standard. The longer an institution spent in the gold standard (and the older the policymakers), the stronger the correlation between gold reserves and currency. Since dollars and gold were not perfect substitutes, the Bretton Woods system never worked as expected. Even after radical institutional change, history still shapes the decisions of policymakers.

Keywords: WP; Bretton Woods system; gold standard exposure; unit of currency; exchange rate; gold standard practice; Bretton Woods; gold; foreign reserves; gold standard; culture; central banks; th gold standard exposure; bullion gold standard; Gold share; Gold reserves; International reserves; Currencies; Monetary base; Global; Middle East; East Africa; Central Africa (search for similar items in EconPapers)
Pages: 32
Date: 2019-07-24
New Economics Papers: this item is included in nep-cwa, nep-his, nep-hpe, nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=47121 (application/pdf)

Related works:
Journal Article: Do old habits die hard? Central banks and the Bretton Woods gold puzzle (2020)
Working Paper: Do Old Habits Die Hard? Central Banks and the Bretton Woods Gold Puzzle (2020)
Working Paper: Do old habits die hard? Central banks and the Bretton Woods gold puzzle (2020)
Working Paper: Do old habits die hard? Central banks and the Bretton Woods gold puzzle (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2019/161

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().