New Zealand's Exchange Rate Regime, the Collapse of Bretton Woods, and the Twilight of the Sterling Area

WEF Working Paper No. 0030

24 Pages Posted: 2 Nov 2007

See all articles by Catherine R. Schenk

Catherine R. Schenk

University of Glasgow - Economic and Social History

John Singleton

Victoria University of Wellington - Te Herenga Waka - School of Economics & Finance

Date Written: October 2007

Abstract

How did developing countries adapt to the collapse of the Bretton Woods system? Using new archival evidence, we argue that New Zealand offers an interesting case study of decision-making in a small economy dependent on primary production with close economic and political links to two larger partners - Britain and Australia - with divergent domestic policies. After some experimentation, New Zealand adopted an innovative intermediate solution for the exchange rate that aimed to generate stability for primary producers during a period when the direction of trade was diversifying and most currencies were floating. This imaginative policy was not accompanied by comparable changes in reserves management, and until 1975 New Zealand continued to hold the bulk of it reserves in sterling. The article explores the different priorities and institutional constraints affecting the choice of anchor currency and reserve currency in this context.

Suggested Citation

Schenk, Catherine R. and Singleton, John, New Zealand's Exchange Rate Regime, the Collapse of Bretton Woods, and the Twilight of the Sterling Area (October 2007). WEF Working Paper No. 0030, Available at SSRN: https://ssrn.com/abstract=1026341 or http://dx.doi.org/10.2139/ssrn.1026341

Catherine R. Schenk (Contact Author)

University of Glasgow - Economic and Social History ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

John Singleton

Victoria University of Wellington - Te Herenga Waka - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6140
New Zealand

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