Central Bank Cooperation 1930-1932, A Reappraisal

The literature on interwar monetary history has argued that the lack of central bank cooperation contributed to the pervasive economic outcome of the 1930s. The reasons for this failure are still an object of debate. In this paper, we revisit the attitude of individual central banks to the attempts led by the Bank for International Settlements (BIS) to institutionalise central bank cooperation. We present original archival evidence to show that the 1931 crisis in central Europe emerged as an exogenous shock, prompting the BIS to become an international lender of last resort and increase the resources at its disposal. However, the BIS relied on member central banks' discretionary behaviour and did not impose a rules-based system. We observe a contrasting attitude towards international cooperation between central banks from creditor and borrowing countries. Some governments prevented their central banks from supporting the BIS' attempts to increase its financial resources. We conclude that this interference was a relevant means through which politics hindered a multilateral response to the crises of the 1930s.