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Going Dutch: The management of monetary policy in the Netherlands during the interwar gold standard

Christopher Colvin () and Philip Fliers

No 2019-03, QUCEH Working Paper Series from Queen's University Belfast, Queen's University Centre for Economic History

Abstract: Under what conditions can policymakers make demonstrably poor policy choices? By providing a new account of monetary policy management in the Netherlands during the interwar gold standard, we show how policymakers can fail to escape their long-held beliefs and refuse to consider available policy alternatives. Using high-frequency macroeconomic data, we are the first to document that the Netherlands' policymakers were able to conduct an independent monetary policy in the 1930s. We then show how this independence was squandered on fixing the guilder's exchange rate, a policy which led only to deflation, trade deficits, corporate bankruptcies and mass unemployment. We explain the government's policy stance by documenting the beliefs of politicians and central bankers, and then by investigating how business leaders and public intellectuals attempted to influence these beliefs.

Keywords: monetary policy; exchange rate policy; gold standard; interwar period; the Netherlands (search for similar items in EconPapers)
JEL-codes: N14 E42 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-his, nep-hpe, nep-mac and nep-mon
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:qucehw:201903

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