Maylis Avaro, Oxford university
This paper provides new evidence on the decline of the pound sterling as an international currency, with a focus on its role as a foreign exchange reserve asset in the Bretton Woods era. I construct a new dataset on the composition of foreign exchange reserves of European and sterling area monetary authorities. Using both quantitative analysis and new archival findings, I challenge the view of a competition between dollar and sterling after WWII. The shift away from sterling occurred earlier than commonly assumed for countries outside the sterling area. The continuation of the postwar reserve role of sterling was artificial as the sterling area was built as a captive market in which countries were constrained to keep their foreign exchange in pounds sterling. I document the exchange controls, commercial threats and economic sanctions employed by the British authorities within the sterling zone to limit the divestments of their sterling assets.
Presented in Session 263. Trade, Finance, Power and Market Structures