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The historical origins of US exchange market intervention policy

Author

Listed:
  • Michael D. Bordo

    (Rutgers University and National Bureau of Economic Research, USA)

  • Owen Humpage

    (Federal Reserve Bank of Cleveland, USA)

  • Anna J. Schwartz

    (National Bureau of Economic Research, USA)

Abstract

This paper examines the historical precedents of US exchange market intervention. Before 1934 we describe operations by the Second Bank of the United States, the US Treasury and the Federal Reserve. We then examine the operations of the Exchange Stabilization Fund, created in 1934 as a Treasury Department agency. Our study, based on unique, unpublished sources, analyses ESF dealings with the Banque de France and the Bank of England before and after the Tripartite Agreement of 1936. Finally, using unique data we discuss US efforts from 1961 through 1972 to defend the dollar's parity under the Bretton Woods System. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Michael D. Bordo & Owen Humpage & Anna J. Schwartz, 2007. "The historical origins of US exchange market intervention policy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 109-132.
    • Handle: RePEc:ijf:ijfiec:v:12:y:2007:i:2:p:109-132
    DOI: 10.1002/ijfe.332
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    References listed on IDEAS

    as
    1. Allan H. Meltzer, 1991. "U.S. policy in the Bretton Woods era," Review, Federal Reserve Bank of St. Louis, issue May, pages 54-83.
    2. Leahy, Michael P, 1995. "The profitability of US intervention in the foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 823-844, December.
    3. Bordo, Michael D. & Schwartz, Anna J., 1999. "Under what circumstances, past and present, have international rescues of countries in financial distress been successful?," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 683-708, August.
    4. Schwartz, Anna J, 1997. "From Obscurity to Notoriety: A Biography of the Exchange Stabilization Fund," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 135-153, May.
    5. B. Dianne Pauls, 1990. "U.S. exchange rate policy: Bretton Woods to present," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 891-908.
    6. Michael D. Bordo, 1993. "The Bretton Woods International Monetary System: A Historical Overview," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 3-108, National Bureau of Economic Research, Inc.
    7. Michael Bordo & Anna J. Schwartz, 2001. "From the Exchange Stabilization Fund to the International Monetary Fund," NBER Working Papers 8100, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Michael D. Bordo & David C. Wheelock, 2010. "The promise and performance of the Federal Reserve as lender of last resort 1914-1933," Working Papers 2010-036, Federal Reserve Bank of St. Louis.
    2. Christopher J. Neely, 2011. "A foreign exchange intervention in an era of restraint," Review, Federal Reserve Bank of St. Louis, vol. 93(Sep), pages 303-324.
    3. Ronald McDonald & Xuxin Mao, 2016. "Japan's Currency Intervention Regimes: A Microstructural Analysis with Speculation and Sentiment," Working Papers 2016_06, Business School - Economics, University of Glasgow.
    4. Frömmel, Michael & Midiliç, Murat, 2021. "Daily currency interventions in an emerging market: Incorporating reserve accumulation to the reaction function," Economic Modelling, Elsevier, vol. 97(C), pages 461-476.
    5. Bordo, Michael D., 2012. "Could the United States have had a better central bank? An historical counterfactual speculation," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 597-607.
    6. Bordo, Michael D. & Macdonald, Ronald & Oliver, Michael J., 2009. "Sterling in crisis, 1964–1967," European Review of Economic History, Cambridge University Press, vol. 13(3), pages 437-459, December.
    7. Rockoff, Hugh & White, Eugene N., 2012. "Monetary Regimes and Policy on a Global Scale: The Oeuvre of Michael D. Bordo," MPRA Paper 49672, University Library of Munich, Germany, revised May 2013.
    8. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093, October.

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    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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