Foreign Exchange Reserve Management in the 19 th Century: The National Bank of Belgium in the 1850s

Stefano Ugolini (1)

1 LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux

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 19 th-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 19 th-century reserve management was apparently not conducive to major losses for central banks, while the opposite seems to have been the case in the 21 st century.

Mots clés: Foreign exchange reserves; International monetary systems; Central banking; Risk management

Domaines: Economies et finances; Histoire; Gestion de portefeuilles [q-fin.PM]

Stefano Ugolini. Foreign Exchange Reserve Management in the 19 th Century: The National Bank of Belgium in the 1850s. Anders Ögren, Lars Fredrik Øksendal. The Gold Standard Peripheries: Monetary Policy, Adjustment and Flexibility in a Global Setting, Palgrave Macmillan, 2012, 978-0-230-36231-4. ⟨hal-01293720⟩