Mutual assistance between Federal Reserve Banks, 1913-1960 as prolegomena to the TARGET2 debate

Arnaud Mehl, Barry Eichengreen, Livia Chitu and Gary Richardson

No 1686, Working Paper Series from European Central Bank

Abstract: This paper reconstructs the forgotten history of mutual assistance among Reserve Banks in the early years of the Federal Reserve System. We use data on accommodation operations by the 12 Reserve Banks between 1913 and 1960 which enabled them to mutualise their gold reserves in emergency situations. Gold reserve sharing was especially important in response to liquidity crises and bank runs. Cooperation among reserve banks was essential for the cohesion and stability of the US monetary union. But fortunes could change quickly, with emergency recipients of gold turning into providers. Because regional imbalances did not grow endlessly, instead narrowing when region-specific liquidity shocks subsided, mutual assistance created only limited tensions. These findings speak to the current debate over TARGET2 balances in Europe. JEL Classification: F30, N20

Keywords: Federal Reserve System; gold standard; liquidity and financial crises; monetary policy; risk sharing; TARGET2 balances (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-his, nep-hpe and nep-mon
Note: 501438
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Mutual Assistance between Federal Reserve Banks: 1913–1960 as Prolegomena to the TARGET2 Debate (2015)
Working Paper: Mutual Assistance between Federal Reserve Banks, 1913-1960 as Prolegomena to the TARGET2 Debate (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20141686

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