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

Stefano Ugolini

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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.

Keywords: Foreign exchange policy; Monetary policy implementation; Reserve management (search for similar items in EconPapers)
Date: 2012
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Published in European Review of Economic History, 2012, 16 (1), pp.51-73. ⟨10.1093/ereh/her005⟩

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Journal Article: The origins of foreign exchange policy: the National Bank of Belgium and the quest for monetary independence in the 1850s (2012)
Working Paper: The Origins of Foreign Exchange Policy: The National Bank of Belgium and the Quest for Monetary Independence in the 1850s (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01293694

DOI: 10.1093/ereh/her005

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