Working Paper: NBER ID: w24016
Authors: Michael Bordo; Eric Monnet; Alain Naef
Abstract: The Gold Pool (1961-1968) was one of the most ambitious cases of central bank cooperation in history. Major central banks pooled interventions – sharing profits and losses – to stabilize the dollar price of gold. Why did it collapse? From at least 1964, the fate of the Pool was in fact tied to sterling, the first line of defense for the dollar. Sterling’s unsuccessful devaluation in November 1967 spurred speculation and massive losses for the Pool. Contagion occurred because US policies were inflationary and insufficiently credible as well. The demise of the Pool provides a striking example of contagion between reserve currencies.
Keywords: Gold Pool; Bretton Woods; Central Bank Cooperation; Reserve Currencies
JEL Codes: E42; F31; F33; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Devaluation of sterling in November 1967 (F31) | Collapse of the gold pool in March 1968 (F31) |
| Devaluation of sterling in November 1967 (F31) | Decline in the credibility of the gold-dollar parity (F31) |
| Decline in the credibility of the gold-dollar parity (F31) | Increased speculation against the dollar (F31) |
| Domestic inflationary policies of the U.S. (E31) | Contagion to reserve currencies (F31) |
| Crisis in sterling (F31) | Speculation against the gold-dollar parity (F31) |
| Credibility of sterling (F36) | Credibility of the gold-dollar parity (F33) |