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Eichengreen, Barry
Mehl, Arnaud
Chiţu, Livia
Richardson, Gary
Year of Publication: 
Series/Report no.: 
ECB Working Paper 1686
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.
Federal Reserve System
gold standard
liquidity and financial crises
monetary policy
risk sharing
TARGET2 balances
Document Type: 
Working Paper
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