Norges Bank

Bicentenary project, Working Paper

Monetary policy under the gold standard - examining the case of Norway, 1893-1914

by Lars Fredrik Øksendal
Working Paper

This essay examines Norwegian monetary policy under the final decades of the classical international gold standard regime prior to World War I. While the evidence clearly demonstrates that the commitment to gold convertibility was the overall objective, the character of monetary policy was determined by the inherent tension between Norges Bank’s role as the guardian of the nation’s most important reserve of foreign exchange and the role as manager of the domestic currency. In order to solve this tension, a core point of monetary policy was to shelter the domestic money supply from changes in the balance of payments. Rather than forcefully reducing domestic circulation during seasonal fluctuations in the flow of gold, Norges Bank operated with a relatively large reserve of notes and foreign securities which took the strain. The effect of this policy was interest rate smoothing and increased freedom for exercising discretionary judgment. Moreover, I present evidence demonstrating that interest rate decisions were influenced by a number of domestic concerns and not only the external balance.


Norges Bank’s Working Papers present research projects and reports that are generally not in their final form. Other analyses by Norges Bank’s economists are also included in the series. The views and conclusions in these documents are those of the authors.

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ISSN 1502-8143 (online)

Published 30 September 2008 15:00
Published 30 September 2008 15:00