Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209983 
Year of Publication: 
2011
Series/Report no.: 
Working Paper No. 2011/07
Publisher: 
Norges Bank, Oslo
Abstract: 
As well as the current one, the wave of globalization culminated in 1913 was marked by increasing accumulation of foreign exchange reserves. But what did 'reserves' mean in the past, how were they managed, and how much relevant are the differences between then and now? This paper is the first attempt to investigate 19th-century reserve management from central banks' perspective. Building on a significant case study (the National Bank of Belgium, i.e. the 'inventor' of foreign exchange policy, in the 1850s), it shows that risk management practices in the past differed considerably from nowadays. The structure of the international monetary system allowed central banks to minimize financial risk, while poor institutional design enhanced operational risk: this is in stark contrast with the present situation, in which operational risk has been minimized and financial risk has considerably increased. Yet 19th-century reserve management was apparently not conducive to major losses for central banks, while the opposite seems to have been the case in the 21st century.
Subjects: 
foreign exchange reserves
international monetary systems
central banking
risk management
JEL: 
E42
E58
G11
N23
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-610-3
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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