An ‘art’, not a ‘science’? Central bank management in Portugal under the gold standard, 1863–87¹

Abstract

As long as Portugal was on the gold standard, the Bank of Portugal sought to help stabilize the currency at the exchange rate to which the country was committed. Because it was subject to political and other non‐economic constraints, the bank carried out discount rate interventions sparingly, although in accordance with what could be termed the contemporary ‘science’ of central banking. Consequently, it had to intervene frequently in the currency markets, usually in covert fashion, in order to conciliate the needs of convertibility with this less than orthodox stance towards the gold standard. This article also shows how the bank was able to keep on repeatedly infringing the ‘rules of the game’ with success for almost 30 years, and raises the question of the sustainability of such a state of affairs.

How the Gold Standard functioned in Portugal: an analysis of some macroeconomic aspects

“…Indeed, they either had harmful effects under the Gold Standard, or they had no significant impact at all. We agree with Mundell (1995), Bordo and Eichengreen (2001) and Reis (2002) when they attribute the disasters of inappropriate policies to the policies themselves, or to the actual system. The Gold Standard did not allow the use of the policies we have seen above.…”

Market leader: the Austro-Hungarian Bank and the making of foreign exchange intervention, 1896-1913

“…Belgium (Conant 1910, p. 180) as well as Finland and many colonies (Bloomfield 1963, p. 23). The Banco de Portugal regularly relied on borrowed reserves (Reis 2007). recent work has built on the econometric analysis of exchange and interest rate data.…”

The origins of foreign exchange policy: the National Bank of Belgium and the quest for monetary independence in the 1850s

“…This was not the case in most other financial centres, where forward exchange markets developed in the aftermath of war world one 3 . But this does not mean that foreign exchange intervention techniques were unknown elsewhere: recent historical research has shown that the central banks of peripheral countries like Portugal (Reis 2007;Esteves et al 2009), Norway (Øksendal 2008), or Sweden (Ögren 2007) were important players on the spot exchange market. Nowhere, however, the scale and scope of foreign exchange policy were comparable to those reached by the National Bank of Belgium (NBB) in its early years.…”

“…RAL, Correspondance, XI/78/1B. 38 This was a technique other central banks did not refuse to adopt, but came at a remarkable cost -as shown by the experience of the Bank of Portugal (Reis 2007). 39 Strictly speaking, from the point of view of the Bank this was a reverse repurchase agreement.…”