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Discussion Paper Details

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Title: Do Old Habits Die Hard? Central Banks and the Bretton Woods Gold Puzzle.

Author(s): Eric Monnet and Damien Puy

Publication Date: September 2020

Keyword(s): Bretton Woods, central banking, culture & beliefs, Foreign reserves, gold and international monetary system

Programme Area(s): Economic History

Abstract: We assess the importance of individual and institutional experience in shaping macroeconomic policy by studying the persistence of gold standard monetary practices in the Bretton Woods system. Using new historical data from the IMF, we show that, although they were not required to, countries continued to back currency in circulation with gold. The longer an institution had spent in the gold standard before 1944 (and the older the policymakers), the tighter the link between gold and currency during Bretton Woods. Such "old habits" prevented dollars and gold from working as perfect substitutes and ultimately contributed to the demise of the Bretton Woods system. Our findings highlight the persistence of past practices, even in the face of radical institutional change, and its consequences on the international monetary system.

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Bibliographic Reference

Monnet, E and Puy, D. 2020. ' Do Old Habits Die Hard? Central Banks and the Bretton Woods Gold Puzzle.'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15286