Going Dutch: monetary policy in the Netherlands during the interwar gold standard, 1925–1936

Abstract

Our study of the day-to-day management of monetary policy in the Netherlands between 1925 and 1936 reveals that policy leaders and central bankers were both willing and able to deviate from the monetary policy paths set by other countries, all while remaining firmly within the gold bloc. The Netherlands wielded an independent monetary policy while remaining on gold thanks to its central bank's plentiful gold reserves. Central bankers quelled any speculation against the guilder by exploiting their domestic policy influence and international reputation to restrict capital mobility. However, maintaining pre-war parity until the collapse of the gold standard in September 1936 came at a cost. Our international comparisons and counterfactual analysis suggest that Dutch officials would have avoided a deepening of the Great Depression by leaving gold alongside the UK in 1931.

Review of periodical literature for 2022: (v) 1850–1945

“…The author argues that policy‐makers’ justifications for legal stabilization and economic and ideological pressures from London, Paris, and Basel, underlying political motivations and cultural attachments to ‘the West’, all form key motivations behind Yugoslavia to join the gold exchange standard in 1931. Lastly, Fliers and Colvin explore the day‐to‐day management of monetary policy in the Netherlands between 1925 and 1936, and interestingly argue that policy leaders and central bankers were both willing and able to deviate from the monetary policy paths set by other countries, all while remaining firmly within the gold bloc. This was such in the Netherlands, as it was able to wield an independent monetary policy while remaining on gold due to plentiful gold reserve base of its central bank.…”