Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2024-12-23T03:48:07.913Z Has data issue: false hasContentIssue false
  • English
  • Français

Sterling in crisis, 1964–1967

Published online by Cambridge University Press:  03 December 2009

MICHAEL D. BORDO ,
RONALD MACDONALD  and
MICHAEL J. OLIVER
MICHAEL D. BORDO
Affiliation:
Department of Economics, Rutgers University, New Jersey Hall, 75 Hamilton Street, New Brunswick, NJ 08901, USA, [email protected]
RONALD MACDONALD
Affiliation:
Department of Economics, University of Glasgow, Glasgow, G12 8RT, UK, [email protected]
MICHAEL J. OLIVER
Affiliation:
ESC Rennes School of Business, 2 rue Robert d'Arbrissel, 30333365 Rennes, CEDEX, France, [email protected]
Get access

Abstract

We provide the first econometric study of foreign exchange market intervention for the UK during the sterling crises from 1964 from 1967. We use daily data on spot and forward dollar/sterling exchange rates and reserve movements which allows a more precise description of the loss of credibility during four currency crises. Reserve losses are consistent with exchange rate crises. External assistance given to sterling throughout this period shored up the reserves and allowed the sterling peg to be maintained.

Type
Research Article
Information
European Review of Economic History , Volume 13 , Issue 3: Foreign Exchange Reserves and the International Monetary System , December 2009 , pp. 437 - 459
Copyright
Copyright © European Historical Economics Society 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bale, T. (1999). Dynamics of a non-decision: the ‘failure’ to devalue the pound, 1964–67. Twentieth Century British History 10, pp. 192–217.CrossRefGoogle Scholar
Blackaby, F. T. (1978). Narrative, 1960–74. In Blackaby, F. T. (ed.), British Economic Policy 1960–1974. Cambridge: Cambridge University Press, pp. 11–76.Google Scholar
Bordo, M. D. (1993). The Bretton Woods international monetary system: a historical overview. In Bordo, M. D. and Eichengreen, B. (eds.), A Retrospective on the Bretton Woods System. Chicago: University of Chicago Press, pp. 3–108.CrossRefGoogle Scholar
Bordo, M., Eichengreen, B., Klingebiel, D. and Martinez-Peri, M. S. (2001). Is the crisis problem growing more severe? Economic Policy 16, pp. 51–82.CrossRefGoogle Scholar
Bordo, M. D. and Schwartz, A. J. (1996). Why clashes between internal and external stability end in currency crises, 1797–1994. Open Economies Review 7, pp. 437–68.CrossRefGoogle Scholar
Bordo, M. D., Humpage, O. and Schwartz, A. J. (2006). The historical origins of US exchange market intervention policy. NBER Working Paper 12662.Google Scholar
Boughton, J. M. (2001). Northwest of Suez: the 1956 crisis and the IMF. IMF Staff Papers 48, pp. 425–46.CrossRefGoogle Scholar
Brandon, H. (1966). In the Red: The Struggle for Sterling, 1964–1966. London: Deutsch.Google Scholar
Brittan, S. (1971). Steering the Economy: The Role of the Treasury. Harmondsworth: Penguin.Google Scholar
Cairncross, A. K. (1985). Years of Recovery: British Economic Policy 1945–51. London: Methuen.Google Scholar
Cairncross, A. K. (1996). Managing the British Economy in the 1960s: A Treasury Perspective. Basingstoke: Macmillan.CrossRefGoogle Scholar
Cairncross, A. K. and Eichengreen, B. (2003). Sterling in Decline; the Devaluations of 1931, 1949 and 1967, 2nd edn.Basingstoke: Palgrave Macmillan.Google Scholar
Caramazza, F. (1993). French-German interest rate differentials and time-varying realignment risk. IMF Staff Papers 40, pp. 567–83.CrossRefGoogle Scholar
Clark, P. B. (1970). Optimum international reserves and the speed of adjustment. Journal of Political Economy 78, pp. 356–76.CrossRefGoogle Scholar
Davis, W. (1968). Three Years Hard Labour: The Road to Devaluation. London: Deutsch.Google Scholar
Dockrill, S. (2002). Britain's Retreat from East of Suez: The Choice Between Europe and the World, 1945–1968. Basingstoke: Palgrave Macmillan.CrossRefGoogle Scholar
Dow, J. C. R. (1964). The Management of the British Economy, 1945–1960. Cambridge: Cambridge University Press.Google Scholar
Dow, J. C. R. (1998). Major Recessions: Britain and the World, 1920–1995. Oxford: Oxford University Press.Google Scholar
Edwards, S. (1984). The demand for international reserves and monetary equilibrium: some evidence from developing countries. Review of Economics and Statistics 78, pp. 495–500.Google Scholar
Eichengreen, B., Rose, A. K. and Wyplosz, C. (1996). Speculative attacks on pegged exchange rates: an empirical exploration with special reference to the European Monetary System. In Canzoneri, M. B., Ethier, W. J. and Grilli, V. (eds.), The New Trans-Atlantic Economy. Cambridge: Cambridge University Press, pp. 191–235.Google Scholar
Frenkel, J. A. and Johnson, H. G. (eds.) (1974). The Monetary Approach to the Balance of Payments. London: Allen and Unwin.Google Scholar
Grubel, H. G. (1971). The demand for international reserves: a critical review of the literature. Journal of Economic Literature 9, pp. 1148–65.Google Scholar
Hallwood, P., Macdonald, R. and Marsh, I. W. (2000). Realignment expectations and the US dollar, 1890–1897: was there a ‘peso problem’? Journal of Monetary Economics 46, pp. 605–20.CrossRefGoogle Scholar
Hamilton, A. (2008). Beyond the sterling devaluation: the gold crisis of March 1968. Contemporary European History 17, pp. 73–95.Google Scholar
Heller, R. H. (1966). Optimal international reserves. Economic Journal 76, pp. 296–311.CrossRefGoogle Scholar
Hirsch, F. (1965). The Pound Sterling: A Polemic. London: Victor Gollancz.Google Scholar
Hutchinson, T. W. (1977). Knowledge and Ignorance in Economics. Oxford: Blackwell.Google Scholar
James, H. (1996). International Monetary Cooperation since Bretton Woods. Oxford: Oxford University Press.Google Scholar
Klug, A. and Smith, G. W. (1999). Suez and sterling, 1956. Explorations in Economic History 36, pp. 181–203.CrossRefGoogle Scholar
Krugman, P. (1979). A model of balance of payments crises. Journal of Money, Credit and Banking 11, pp. 311–25.CrossRefGoogle Scholar
Macdonald, R. (2007). Exchange Rate Economics: Theories and Evidence, 2nd edn. London: Routledge.CrossRefGoogle Scholar
Middleton, R. (1996). Government Versus the Market: The Growth of the Public Sector, Economic Management and British Economic Performance. Cheltenham: Edward Elgar.Google Scholar
Middleton, R. (2002). Struggling with the impossible: sterling, the balance of payments and British economic policy, 1949–72. In Arnon, A. and Young, W. L. (eds.), The Open Economy Macromodel: Past, Present and Future. Boston, MA: Kluwer Academic, pp. 103–54.CrossRefGoogle Scholar
National Institute Economic Review (1964). The economic situation: annual review. National Institute Economic Review 27, pp. 4–12.Google Scholar
National Institute Economic Review (1967). The effects of devaluation and the balance of payments. National Institute Economic Review 42, pp. 4–9.Google Scholar
NEDC (1964). The Growth of the Economy. London: HMSO.Google Scholar
Newton, S. (2009). The two sterling crises of 1964 and the decision not to devalue. Economic History Review, forthcoming.CrossRefGoogle Scholar
Obstfeld, M. (1984). Balance of-payments crises and devaluation. Journal of Money, Credit and Banking 16, pp. 208–17.CrossRefGoogle Scholar
Oppenheimer, P. (1966). Forward exchange intervention: the official view. Westminster Bank Review, February.Google Scholar
Rose, A. and Svensson, L. (1995). European exchange rate credibility before the fall. European Economic Review 38, pp. 1185–1216.CrossRefGoogle Scholar
Roy, R. (2000). The battle of the pound: the political economy of Anglo-American relations, 1964–1968. Unpublished PhD thesis, London School of Economics.Google Scholar
Schenk, C. R. (1994). Britain and the Sterling Area: from Devaluation to Convertibility in the 1950s. London: Routledge.CrossRefGoogle Scholar
Schenk, C. (2002). Sterling, international monetary reform and Britain's applications to the EEC in the 1960s. Contemporary European History 11, pp. 345–69.CrossRefGoogle Scholar
Siklos, P. and Tarajos, R. (1996). Fundamentals and devaluation expectations in target zones: some new evidence from the ERM. Open Economies Review 25, pp. 35–59.CrossRefGoogle Scholar
Stewart, M. (1977). The Jekyll and Hyde Years: Politics and Economic Policy Since 1964. London: J. M. Dent.Google Scholar
Svensson, L. E. O. (1993). Assessing target zone credibility: mean reversion and devaluation expectations in the ERM, 1979–1992. European Economic Review 37, pp. 763–93.CrossRefGoogle Scholar
Tomlinson, J. (2004). The Labour Governments 1964–70, vol. 3: Economic Policy. Manchester: Manchester University Press.Google Scholar
Wyplosz, C. (1986). Capital controls and balance of payments crises. Journal of International Money and Finance 5, pp. 167–79.CrossRefGoogle Scholar