A Monetary Plethora and What to Do with it: The Bank of Portugal During the Second World War and the Postwar Period (1931–60)

28 Pages Posted: 13 Jul 2018

See all articles by Luciano Amaral

Luciano Amaral

New University of Lisbon - Nova School of Business and Economics

Date Written: August 2018

Abstract

Until the Second World War the Bank of Portugal (BoP) was a long way from possessing the features normally associated with a central bank. It was still a commercial bank, albeit one that had acquired some central bank functions. The war period was decisive in removing this ambiguity. The change was caused mostly by an unusually large influx of international means of payment (gold and foreign exchange) as a consequence of Portugal's neutrality during the war. However, all of this happened during a very troubled period for the BoP, thanks to the collapse of the gold‐exchange standard. The BoP adapted quickly to the new environment of discretion, government interference, and nationalism, although in a relatively original way: it followed the trend but at the same time retained certain features of a central bank still committed to gold standard principles. The two essential objectives of the BoP were to keep the value of the Portuguese currency stable and to keep interest rates low in order to encourage economic growth. The bank was successful on both counts during the war and the postwar period using a series of non‐conventional instruments.

Suggested Citation

Amaral, Luciano, A Monetary Plethora and What to Do with it: The Bank of Portugal During the Second World War and the Postwar Period (1931–60) (August 2018). The Economic History Review, Vol. 71, Issue 3, pp. 795-822, 2018. Available at SSRN: https://ssrn.com/abstract=3212420 or http://dx.doi.org/10.1111/ehr.12606

Luciano Amaral (Contact Author)

New University of Lisbon - Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

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