Mutual Assistance between Federal Reserve Banks, 1913-1960 as Prolegomena to the Target2 Debate

44 Pages Posted: 30 Jun 2014 Last revised: 19 May 2023

See all articles by Barry Eichengreen

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Arnaud Mehl

European Central Bank (ECB)

Livia Chitu

European Central Bank (ECB)

Gary Richardson

University of California at Irvine; National Bureau of Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

This paper reconstructs the forgotten history of mutual assistance among Reserve Banks in the early years of the Federal Reserve System. We use data on accommodation operations by the 12 Reserve Banks between 1913 and 1960 which enabled them to mutualise their gold reserves in emergency situations. Gold reserve sharing was especially important in response to liquidity crises and bank runs. Cooperation among reserve banks was essential for the cohesion and stability of the US monetary union. But fortunes could change quickly, with emergency recipients of gold turning into providers. Because regional imbalances did not grow endlessly, instead narrowing when region-specific liquidity shocks subsided, mutual assistance created only limited tensions. These findings speak to the current debate over TARGET2 balances in Europe.

Suggested Citation

Eichengreen, Barry and Mehl, Arnaud and Chitu, Livia and Richardson, Gary, Mutual Assistance between Federal Reserve Banks, 1913-1960 as Prolegomena to the Target2 Debate (June 2014). NBER Working Paper No. w20267, Available at SSRN: https://ssrn.com/abstract=2460606

Barry Eichengreen (Contact Author)

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Arnaud Mehl

European Central Bank (ECB) ( email )

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Livia Chitu

European Central Bank (ECB) ( email )

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Gary Richardson

University of California at Irvine ( email )

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