An ‘art’, not a ‘science’? Central bank management in Portugal under the gold standard, 1863–871

Abstract

As long as Portugal was on the gold standard, the Bank of Portugal sought to help stabilize the currency at the exchange rate to which the country was committed. Because it was subject to political and other non‐economic constraints, the bank carried out discount rate interventions sparingly, although in accordance with what could be termed the contemporary ‘science’ of central banking. Consequently, it had to intervene frequently in the currency markets, usually in covert fashion, in order to conciliate the needs of convertibility with this less than orthodox stance towards the gold standard. This article also shows how the bank was able to keep on repeatedly infringing the ‘rules of the game’ with success for almost 30 years, and raises the question of the sustainability of such a state of affairs.

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