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A monetary plethora and what to do with it: the Bank of Portugal during the Second World War and the postwar period (1931–60)

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  • Luciano Amaral

Abstract

Until the Second World War the Bank of Portugal (BoP) was a long way from possessing the features normally associated with a central bank. It was still a commercial bank, albeit one that had acquired some central bank functions. The war period was decisive in removing this ambiguity. The change was caused mostly by an unusually large influx of international means of payment (gold and foreign exchange) as a consequence of Portugal's neutrality during the war. However, all of this happened during a very troubled period for the BoP, thanks to the collapse of the gold‐exchange standard. The BoP adapted quickly to the new environment of discretion, government interference, and nationalism, although in a relatively original way: it followed the trend but at the same time retained certain features of a central bank still committed to gold standard principles. The two essential objectives of the BoP were to keep the value of the Portuguese currency stable and to keep interest rates low in order to encourage economic growth. The bank was successful on both counts during the war and the postwar period using a series of non‐conventional instruments.

Suggested Citation

  • Luciano Amaral, 2018. "A monetary plethora and what to do with it: the Bank of Portugal during the Second World War and the postwar period (1931–60)," Economic History Review, Economic History Society, vol. 71(3), pages 795-822, August.
    • Handle: RePEc:bla:ehsrev:v:71:y:2018:i:3:p:795-822
    DOI: 10.1111/ehr.12606
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    References listed on IDEAS

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    1. Michael D. Bordo, 1993. "The gold standard, Bretton Woods and other monetary regimes: a historical appraisal," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 123-191.
    2. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093, October.
    3. Marcelo Paiva Abreu, 2014. "A ‘blank cheque'? Portuguese Second World War sterling balances, 1940–73," Economic History Review, Economic History Society, vol. 67(2), pages 535-555, May.
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    1. Tavares, José & Leitão, Diogo & Pereira, Jaime & Pereira Dos Santos, Joao, 2019. "The War Next Door and the Reds are Coming: The Spanish Civil War and the Portuguese Stock Market," CEPR Discussion Papers 13990, C.E.P.R. Discussion Papers.

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