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

33 Pages Posted: 27 Aug 2019

See all articles by Eric Monnet

Eric Monnet

Banque de France; Paris School of Economics (PSE)

Damien Puy

International Monetary Fund (IMF)

Date Written: July 2019


Why did monetary authorities hold large gold reserves under Bretton Woods (1944-1971) when only the US had to? We argue that gold holdings were driven by institutional memory and persistent habits of central bankers. Countries continued to back currency in circulation with gold reserves, following rules of the pre-WWII gold standard. The longer an institution spent in the gold standard (and the older the policymakers), the stronger the correlation between gold reserves and currency. Since dollars and gold were not perfect substitutes, the Bretton Woods system never worked as expected. Even after radical institutional change, history still shapes the decisions of policymakers.

Keywords: Monetary statistics, International monetary system, Economic stabilization, Exchange rate policy, Central banks, Bretton Woods, gold, foreign reserves, gold standard, culture, gold reserve, institutional memory, Bordo

JEL Classification: D8, E5, F5, F55, M14, N1, E52, O24, F3, E01

Suggested Citation

Monnet, Eric and Puy, Damien, Do Old Habits Die Hard? Central Banks and the Bretton Woods Gold Puzzle (July 2019). IMF Working Paper No. 19/161, Available at SSRN:

Eric Monnet (Contact Author)

Banque de France ( email )


Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014

Damien Puy

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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