TABLES OF MODERN MONETARY HISTORY: ASIA



by Kurt Schuler

www.dollarization.org

Preliminary version, 29 February 2004

This is one in a series of tables that will eventually cover the modern monetary systems of all continents. I intend to summarize some of the information here in spreadsheet form later. For detailed explanations of the categories and terms in the tables, see the accompanying "explanation" file. I welcome comments from knowledgeable readers. Because I read no Asian languages, I was unable to consult official documents and much local scholarship for many countries, so I am more likely to have made errors here than for any other continent. Should you have a suggested correction, please specify the source of your information. I am most interested in information from primary sources, particularly laws and the reports of monetary authorities.

Copyright 2004 by Kurt Schuler. This paper may be printed out for personal use by individuals, but may not otherwise be reproduced. In quotations or citations, please note that this is a preliminary version. As with all the writings on my Web site, the material here reflects my personal views, which are not necessarily those of my employer, the Joint Economic Committee of the U.S. Congress.



Notes

The tables use these abbreviations or symbols: g = grams, £ = pound, $ = dollar, SDR = Special Drawing Right of the International Monetary Fund.

For former Soviet republics that became independent in 1991, the first and second banks are not listed because those countries inherited multiple state banks and in some cases fledgling private banks from the Soviet economic system.



Afghanistan



Political sketch

Independent from the hegemony of the United Kingdom on 19 August 1919.

Afghanistan, previously divided into mostly independent principalities partly within the Mughal empire of India and partly within the Safavid empire of Persia, was united in the 1700s by the Persian leader Nader Shah and his successor Ahmad Khan Abdali (Ahmad Shah Durrani). After Durrani's death in 1772, the empire foundered because of clashing tribal and family loyalties and the imperialist designs of Russia and Great Britain. The British sought to extend control over Afghanistan in a series of wars from 1839 to 1919, but they were unable to subdue the population, and Afghanistan basically retained its independence. The United Kingdom formally recognized Afghanistan's independence by the Treaty of Rawalpindi, signed on 8 August 1919 to end the Third Afghan War. From the 1930s a series of cautious and moderate governments under the Afghan monarchy brought political stability.

A 1973 coup supported by the leftist Parcham ("Flag") Party ended the monarchy and made Afghanistan a republic. The Parcham and the leftist Khalq ("Masses") parties joined to form the People's Democratic Party of Afghanistan in 1977, and together they seized control of the government in a coup of 27 April 1978. But friction arose between the two factions, and their Marxist policies sparked rebellions in the countryside by 1979. Soviet troops invaded Afghanistan on 24 December 1979 to prevent their Afghan clients from being overthrown. A civil war followed in which Afghan rebels supported by the United States and Pakistan resisted the government. Millions of Afghan civilians fled into Pakistan and Iran. The guerrillas controlled most of the countryside, while Soviet troops held the cities. After years of futile effort, the Soviet Union withdrew its troops from Afghanistan from May 1988 to February 1989. In April 1992 several rebel factions succeeded in capturing Kabul, overthrowing the communist government, and establishing a provisional Islamic republic. The Taliban faction eventually emerged on top, though there remained areas of the country in the control of rival groups. In 2001, after the Afghan government failed to satisfy demands by the United States to cease giving refuge to the Al Qaeda terrorist organization responsible for attacks in the United States on 11 September 2001, the United States supported groups opposed to the Taliban. They entered Kabul on 13 November 2001. Afghanistan installed a transitional government on 22 December 2001. Currently (2004) warlords still control large areas of the country and the new government is still trying to exert its authority and lay the foundation for Afghanistan's first full-fledged experience of democracy. Afghanistan's economy is largely agricultural, and its exports include opium.



Wars since 1500

Babur's Capture of Kabul, 1504; Conquests of Babur, 1524-1529 (in India); Mogul-Afghan War of 1565-1581; Mogul-Persian War of 1622-1623; Wars of Aurangzeb, 1636-1657 (against Persia and others); Mogul-Persian War of 1638; Mogul-Persian War of 1649-53; Afghan Rebellions of 1709-1726 (against Persia); Persian-Afghan War of 1726-1738; Afghan-Maratha War of 1758-1761 (in present-day India and Pakistan); Persian-Afghan War of 1798; Persian-Afghan War of 1816; Afghan Civil War of 1818-1826; Afghan-Sikh War, 1836; First Afghan War, 1839-1842 (Afghans against United Kingdom); Persian-Afghan War of 1836-1838; Afghan Civil War of 1850-1855; Persian-Afghan War of 1855-1857; Afghan Civil War of 1863-1879; Second Afghan War, 1878-1880 (Afghans against United Kingdom); Russo-Afghan War of 1885; Third Afghan War, 1919 (Afghans against United Kingdom); Khowst Rebellion, 1924; Afghan Civil War of 1928-1929; Afghan Civil War of 1979-2001 (including war of Taliban against Northern Alliance supported by United States, 2001).



Convertibility

Introduced exchange controls about April 1938.



Other

Defaults on or restructurings of debt to the foreign private sector to private sector to private sector: None.

Economic crisis 1928, seemingly related to the civil war.

Banking crises: None listed, although given Afghanistan's history it is implausible that there have been none.

Frankel and Rose (1996) list of currency crashes: Afghanistan not included.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Fry (1974), Gregorian (1969).



Monetary authorities: Afghanistan

Dates Type Name Legal basis Remarks
1919

-early 1920s

government issue Afghanistan Treasury (headquarters Kabul, Afghanistan) The government made an unsuccessful effort to introduce a local paper money. The first coins were issued in the 300s BC.
early 1920s

-1936

dollarization (notes) alongside government issue (coins) Indian rupee notes (issued by government of India [headquarters New Delhi, India] / by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India] from 1 April 1935) alongside local coins (issued by government of Afghanistan) (headquarters Kabul, Afghanistan) British India (present-day India, Pakistan, and Bangladesh) was Afghanistan's largest trading partner, hence Afghanis used Indian rupees widely. In 1927, Afghanistan introduced a uniform national coinage, denominated in afghanis (Afghanistan, Law of 14 March 1925). The first bank was the Shirkat-i-Sahami-i-Afghan (also spelled Sherkate Sahami, headquarters Kabul, Afghanistan), in Kabul, in 1931. In April or May 1932 it became Bank Millie, also known as Bank-i-Milli or Banke Millie Afghan (Afghan National Bank). The bank was partly owned by the government and acted as the government's financial agent.
1936

-1939

government issue Afghanistan Ministry of Finance (headquarters Kabul, Afghanistan) Afghanistan, Law on Banknotes in Circulation in Afghanistan, 26 October 1935 Afghanistan established government issue as part of the attempt, begun with the establishment of Bank Millie, to introduce modern financial practices.
1939

-1979

central bank (perhaps with commercial banking functions) Da Afghanistan Bank (Central Bank of Afghanistan) (headquarters Kabul, Afghanistan) Afghanistan, Statutes of Da Afghanistan Bank, 1939 The government established a central bank because Bank Millie managers were making illegal profits from manipulating the system of multiple exchange rates. Afghanistan joined the IMF on 14 July 1955. The government nationalized banks on 1 June 1975 (Afghanistan, presidential announcement of 1 June 1975).
1979

-1992?

monobank Da Afghanistan Bank (Central Bank of Afghanistan) (headquarters Kabul, Afghanistan) Established a monobank system as part of the attempt during the period of Soviet influence to establish a centrally planned economy.
1992?

-1994?

central bank (with commercial banking functions) Da Afghanistan Bank (Central Bank of Afghanistan) (headquarters Kabul, Afghanistan) Afghanistan moved away from a centrally planned economy after its communist government was overthrown.
1994?

-1995

central bank (with commercial banking functions) alongside rival government issues Da Afghanistan Bank (Central Bank of Afghanistan) (headquarters Kabul, Afghanistan) in Kabul alongside two regional issuers During the civil war of the period, two governments fighting against the Taliban government in Kabul issued their own currencies: the Tajik Northern Alliance and ethnic Uzbek forces under General Abdul Rashid Dostum.
1995

-6 October 2002

central bank alongside rival government issues Da Afghanistan Bank (Central Bank of Afghanistan) (headquarters Kabul, Afghanistan) in Kabul alongside two regional issuers The central bank ceased performing commercial banking functions. Under the Taliban government (September 1996 to November 2001), no new notes were printed.
7 October 2002

-present

central bank (with commercial banking functions) Da Afghanistan Bank (Central Bank of Afghanistan) (headquarters Kabul, Afghanistan) Unified the currencies issued in Kabul with those issued by two regions after the Northern Alliance won the war with help from the United States in 2002. The central bank began offering commercial banking services again sometime in 2002, before 7 October.



Exchange rate arrangements: Afghanistan

Note: This history is sketchy except for the period 1955-1979.

Dates Arrangement Legal basis Remarks
to 1890? regional currencies (see Remarks) Regional currencies were defined in terms of different weights of silver and their exchange rates fluctuated with respect to each other because they were sometimes debased (see Gregorian 1969: 401-3). The currency of the Kabul region was the Kabuli rupee. Shir Ali Khan, in his rule from 1868-1879, tried to introduce the decimalized afghani to replace the Kabuli rupee but was unsuccessful.
1890?

-1927

hard peg; 1 Kabuli rupee = 9 g silver The central government succeeded in replacing regional currencies with Kabuli rupee. I have not identified the precise date: Gregorian (1969: 142) says only that it happened during reign of Abdur Rahman Kahn (1880-1901). Afghans also used Russian rubles to a lesser extent until the Russian Revolution of 1917, and Iranian silver coins. The Kabuli rupee was the unit of account. The word "rupee"comes from a Sanskrit word meaning "coined silver," and the Kabuli rupee was inspired by the Indian rupee.
1927

-1935

soft peg; 1 Afghan afghani = 10g silver initially Afghanistan, Law of 14 March 1925 The decimalized Afghan afghani replaced the Kabuli rupee at 1 afghani = 1.10 Kabuli rupees. As time passed, the government debased the coinage. The name "afghani" comes from the word Afghanistan.
1935

-1938

soft peg, dual rate; official rate 4 Afghan afghanis = 1 Indian rupee As a result of continuous currency debasement, the exchange rate was soon overvalued and required increasingly strict exchange controls to support it. A preferential exchange rate for government transactions existed until 1973. The afghani has never had a sustained period of exchange rate stability since its introduction.
1938

-1940

managed float?, dual rate The afghani ceased to have a pegged rate.
1940

-April 1947

hard peg, dual rate; 13 Afghan afghanis = US$1 Pegged exchange rate.
April 1947

-22 December 1948

hard peg, dual rate; 13.44 Afghan afghanis = US$1 Devalued slightly.
23 December 1948

-30 September 1949

hard peg, dual rate; 14.17 Afghan afghanis = US$1 Devalued.
1 October 1949

-18 March 1954

hard peg, dual rate; official rate 16.80 Afghan afghanis = US$1 Devalued following the devaluation of the pound sterling on 18 September 1949.
19 March 1954

-23 October 1956

hard peg, multiple rates; official rate 16.80 Afghan afghanis = US$1 Introduced a third exchange rate.
24 October 1956

-21 March 1963

hard peg, multiple rates; official rate 20 afghanis = US$1 Devalued.
22 March 1963

-10 February 1968

hard peg, dual rate; official rate 45 Afghan afghanis = US$1, or 1 Afghan afghani = 0.0197482g gold Afghanistan, Council of Ministers, Resolution No. 815, 15 December 1962 Devalued, simplified the exchange rate system to an official rate and a floating free rate, and established a gold parity. Afghanistan agreed to a gold parity with the IMF on 25 January 1963 and registered it on 22 March 1963.
11 February 1968

-14 August 1971

hard peg, multiple rates; official rate 45 Afghan afghanis = US$1, or 1 Afghan afghani = 0.0197482g gold Eliminated an import tax on certain goods and introduced exchange subsidies instead.
15 August 1971

-31 March 1978

hard peg, multiple rates; official rate 45 Afghan afghanis = US$1, or 1 Afghan afghani = 0.0197482g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Afghanistan did not follow the devaluation of the US dollar against gold on 18 December 1971, but neither did it revalue against the US dollar. The IMF source lists Afghanistan as employing wider margins starting 1975.
1 April 1978

-20 May 1979

hard peg, multiple rates; official rate 45 Afghan afghanis = US$1 International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members.
21 May 1979

-27 July 1979

managed float Unified the exchange rate and floated; the initial floating rate was 43.50 Afghan afghanis = US$1.
28 July 1979

-31 December 1981

managed float, dual rate (controlled) Established a subsidy rate for exports of karakul (lambskin). The IMF source considers this minor and classifies Afghanistan as having a unified official exchange rate. However, on 3 January 1981 a 3% surcharge was imposed on sales of foreign exchange, and the surcharge was raised to 5% on 8 June 1981. Afghanistan made the central bank into a monobank in this period.
1 January 1982

-25 January 1982

hard peg (controlled) 50.60 Afghan afghanis = US$1 (IMF: limited flexibility) Abolished the surcharge on sales of foreign exchange.
26 January 1982

-1985

hard peg, dual rate (controlled) 50.60 Afghan afghanis = US$1 (IMF: limited flexibility) Introduced a second exchange rate (also floating) to replace the surcharge on sales of foreign exchange.
1985

-30 November 1989

hard peg, multiple rates (controlled) 50.60 Afghan afghanis = US$1 (IMF: limited flexibility to 1986, pegged from 1987) The IMF source first mentions multiple exchange rates in 1985, but they may have begun earlier. Because the Afghan civil war isolated Afghanistan, information for the 1980s and 1990s may be incomplete.
1 December 1989

-1992?

hard peg, multiple rates; 50.60 Afghan afghanis = US$1 Simplified exchange rate structure from May to December 1989, leaving an official rate and a commercial rate, as well as a market-determined bazaar rate.
1992?

-1997

hard peg, multiple rates; 50.60 Afghan afghanis = US$1 (IMF: independent float) Ended the monobank system at about this time, after the communists lost power. The IMF reclassified the exchange rate as an independent float in 1992 because the official rate only applied to a few transactions by then. The Northern Alliance issued a rival currency during civil war by 1994.
1997

-2001?

hard peg, dual rate; 50.60 Afghan afghanis = US$1 (IMF: independent float) A dual exchange rate replaced multiple rates.
2001?

-6 October 2002

hard peg, multiple rates; 50.60 Afghan afghanis = US$1 (IMF: independent float) The IMF source lists the exchange rate as multiple by this time, without giving details. Because the IMF received limited information from the Afghan government from 1995-2001, the actual starting date may have been earlier.
7 October 2002

-present

Afghan new afghani, managed float (IMF: independent float, reclassified as managed float 1 January 2002) Afghanistan, presidential decree of 4? September 2002 (reform was announced 4 September 2002) Redenominated the currency at 1 new afghani = 1,000 old afghanis. At time of redenomination it was trading at about 46,000 old afghanis = US$1, after having fallen as low as 60,000 old afghanis = US$1. Northern Alliance (junbishi) currency was accepted for exchange at 1 new afghani = 2,000 old junbishi afghanis; "movement" afghanis, used in part of northeastern Afghanistan controlled by General Abdul Rashid Dostum, were accepted at the same rate. The currency exchange ended on 2 January 2003.



Azerbaijan



Political sketch

Independent from Russia from 28 May 1918-27 April 1920 and from the Union of Soviet Socialist Republics on 18 October 1991.

Azerbaijan adjoins the Iranian region of Azerbaijan, and their inhabitants are of common descent. As a result of several wars, Under the Turkmenchay treaty of 1828, Persia ceded to Russia what is now independent Azerbaijan. Azerbaijan differed from the neighboring Christian countries of Armenia and Georgia in that its inhabitants were mainly Turkish-speaking Shiite Muslims. Azerbaijan's rich oil fields, which provide what is still today the country's biggest export, began to be exploited in the 1870s. After the Russian Revolution of October 1917, Azerbaijan declared its independence from Russia on 28 May 1918. As elsewhere in the former Russian empire, Communist forces fought anticommunist forces. In this case, the Ottoman Empire supported the anticommunist forces and helped ensure their victory. There was also an overlapping struggle between Armenians and Azeris for territory. Following the end of the First World War, Azerbaijan was briefly under British protection. In April 1920 the Soviet Red Army invaded Azerbaijan and ended its independence. From 12 March 1922 Azerbaijan was part of the Transcaucasian Soviet Federated Socialist Republic, but on 5 December 1936 Azerbaijan became a union republic in its own right.

Azerbaijan declared independence from the collapsing Soviet Union on 18 October 1991, and its independence was confirmed by the dissolution of the Soviet Union on 26 December 1991. War soon broke out with Armenia over Nagorno-Karabakh, a region of western Azerbaijan with a mostly Armenian population. Nagorno-Karabakh had been an autonomous region under Soviet rule, and ethnic Armenians did not want Azeri rule. Azerbaijan lost control of Nagorno-Karabakh to Karabakh forces supported by Armenia. Discontent over losses in the war enabled Haidar Aliyev to become president on 24 June 1993. Aliyev's presidency hardened into a dictatorship. Ilham Aliyev succeeded his father as president on 31 October 2003 after a fraudulent election. Azerbaijan signed a cease-fire with Armenia concerning Nagorno-Karabakh in May 1994, but the conflict has still not been resolved politically. Azerbaijan continues to claim Nagorno-Karabakh. Azerbaijan has an exclave called Nakhichevan that has an Azeri majority but is separated from the rest of Azerbaijan by Armenian territory.



Wars since 1500

Safavid Conquest of Azerbaijan, 1500-1503; Battle of Chaldiran, 1514 (Turks against Safavids); Turko-Persian War of 1578-90; Turko-Persian War of 1616-1618; Turko-Persian War of 1730-1736; Russo-Persian War of 1722-1723; Russo-Persian War of 1804-1813; Russo-Persian War of 1825-1828; Russo-Persian War of 1911; Russian Civil War, 1917-1920; Armenian-Azerbaijani War of 1988-1994; Azerbaijan Revolt of 1993.



Convertibility

The Union of Soviet Socialist Republics (USSR) established a monobank system in early 1918, soon after the Bolshevik Revolution. It established a two-tier banking system in 1988 as a step away from central planning. The two-tier system was the basis of the national banking systems that former Soviet republics established after the USSR dissolved in late 1991, with the local branch of the State Bank of the USSR typically becoming the new national central bank. The Bank of Russia became the successor to the State Bank of the USSR as the issuer of the ruble. Former Soviet republics used the Russian ruble and were part of the ruble zone until they established their own national currencies. Some countries established coupon currencies as a temporary step, while others proceeded directly to full-fledged currencies. Cash rubles (paper money) were uniform throughout the former USSR, but noncash rubles (deposits) in various republics exchanged at varying rates against one another and against cash in the free or black market. On 24 July 1993, Russia announced that Soviet and Russian notes issued before 1993 would become invalid as of 26 July. In Russia, the period for exchanging notes issued before 1993 lasted until 31 August 1993. Russia's demonetization of notes issued before 1993 notes marked the end of attempts to keep the former USSR largely intact as a ruble zone. In some former Soviet republics, Soviet and Russian notes issued before 1993 remained legal tender for a time even though they had ceased to be legal tender in Russia.



Other

Defaults on or restructurings of debt to the foreign private sector to private sector: None.

Banking crises: numerous banks closed or deemed insolvent 1995-past 1999.

Frankel and Rose (1996) list of currency crashes: Azerbaijan not included.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Hanke (1998).

Monetary authorities: Azerbaijan

Dates Type Name Legal basis Remarks
about 28 May 1918

-8 June 1920

central bank (with commercial banking functions) Gosudarstvennyi Bank (State Bank of Russia [headquarters Moscow, Russia], Baku branch) / Azerbaycan Milli Banki? (State Bank of Azerbaijan) (headquarters Baku, Azerbaijan) from 30 September 1919 Azerbaijan, Charter of the State Bank of Azerbaijan, 16 September 1919 Azerbaijan shared Russia's monetary system from the time of the Russian conquest, which began in 1806. When Azerbaijan declared independence from Russia, it converted the Baku branch of the State Bank of Russia into a local central bank. From January 1918 notes issued by Baku city council also circulated. The State Bank of Russia was the first bank in Azerbaijan, establishing a branch in Baku in 1861. The second bank is unknown to me. The first coins were issued in the 200s BC.
9 June 1920

-13 August 1920

monobank (regional issuer within currency union) [Azeri name unknown to me] (Azerbaijan People's Bank) (headquarters Baku, Azerbaijan) Azerbaijan, [Soviet] Revolutionary Committee of Azerbaijan, Finance Commissariat, decision of 31 May 1920 After Bolshevik forces reconquered Azerbaijan, the Bolsheviks renamed the State Bank of Azerbaijan and in effect converted it into a branch of the State Bank of the USSR (headquarters Moscow, Russia). The Soviets also nationalized all banks (Revolutionary Committee of Azerbaijan, decision of 9 June 1920).
14 August 1920

-15 October 1921

"moneyless" economy Azerbaijan, Central Budget Department (headquarters Baku, Azerbaijan) Azerbaijan, [Soviet] Revolutionary Committee of Azerbaijan, decision of 14 August 1920 The Bolsheviks attempted to establish a nonmonetary economy in the USSR as part of "War Communism."
16 October 1921

-9 January 1923

monobank (regional issuer within currency union) [Azeri name unknown to me] (State Bank of Azerbaijan) (headquarters Baku, Azerbaijan) Azerbaijan, Board of the People's Commissariat of Azerbaijan, decision of 16 October 1921 The economic failure of War Communism led to the partial return to a monetary economy.
10 January 1923

-17 October 1991

monobank (as part of currency union) Gosudarstvennyi Bank Soyuz Sovetskikh Sotsialisticheskikh Respublik (Gosbank) (State Bank of the USSR) (headquarters Moscow, Russia) USSR, Board of the Federative Union of the Transcauscasus Soviet Socialist Republics, decision of 10 January 1923 The State Bank of the USSR took over the State Bank of Azerbaijan's note issues as the Transcaucasus became a unified currency zone with Russia. The other functions of the State Bank of Azerbaijan as a central bank were ended by a decree of the Council of the People's Commissariat of Azerbaijan, 3 July 1923.
18 October 1991

-14 August 1992

dollarization Soviet ruble (issued by central bank Gosudarstvennyi Bank Soyuz Sovetskikh Sotsialisticheskikh Respublik [Gosbank] [State Bank of the USSR] [headquarters Moscow, Russia]) / Russian ruble from 20 December 1991 (issued by Bank Rossii [Central Bank of Russia] [headquarters Moscow, Russia]) Azerbaijan temporarily used the Soviet (later Russian) ruble after declaring independence from the Union of Soviet Socialist Republics.
15 August 1992

-31 December 1993

central bank alongside dollarization Azerbaycan Milli Banki (National Bank of Azerbaijan) alongside Russian ruble (issued by central bank Bank Rossii [Central Bank of Russia] [headquarters Moscow, Russia]) (independent) Azerbaijan, Law on the National Bank of Azerbaijan, 7 August 1992; Law on Banks and Banking Activity, August 1992 Established a central bank to issue a national currency. Part of the impetus came from a shortage of cash in first half 1992, when Central Bank of Russia did not ship as many ruble notes to Azerbaijan as the Azeris perceived they needed. The circulation of national currency was small in this period. The Law on Banks and Banking Activity officially replaced the Soviet monobank system with a two-tier system, but in practice, monobank-style policies seem to have lasted until 1993.
1 January 1994

-present

central bank Azerbaycan Milli Banki (National Bank of Azerbaijan) (headquarters Baku, Azerbaijan) A national currency, the manat, completely replaced Russian ruble in official circulation.



Exchange rate arrangements: Azerbaijan

Dates Arrangement Legal basis Remarks
1806

-about 28 May 1918

fixed; used Russian ruble (as part of currency union) Russia introduced the Russian ruble after it began its conquest of the region in 1806. The Russian ruble was a decimal currency since 1704.
about 28 May 1918

-29 September 1919

Russian ruble and Baku city council notes, clean? float After declaring independence from Russia, Azerbaijan converted the Baku branch of the State Bank of Russia branch into a local central bank. From January 1918 notes issued by Baku city council also circulated.
30 September 1919

-30 May 1920

Azerbaijan ruble, clean? float Azerbaijan, Charter of the State Bank of Azerbaijan, 16 September 1919 Azerbaijan established a distinctive national currency.
31 May 1920

-13 August 1920

officially, hard peg? (as part of currency union), 1 Azerbaijan Soviet ruble = 1 Soviet rule; in practice, clean float? Azerbaijan, [Soviet] Revolutionary Committee of Azerbaijan, decision of Finance Commissariat, decision of 31 May 1920 After the Bolsheviks reconquered Azerbaijan, they in effect converted the Azerbaijan ruble into a local issue of the Soviet ruble.
14 August 1920

-15 October 1921

pure credit and barter economy (as part of currency union) Azerbaijan, [Soviet] Revolutionary Committee of Azerbaijan, decision of 14 August 1920 The Bolsheviks attempted to establish a nonmonetary economy in the USSR as part of "War Communism." The exchange rate was fixed in the sense that there was a common unit of account throughout the USSR.
16 October 1921

-9 January 1923

fixed (as part of currency union); Azerbaijan issue of Soviet ruble Azerbaijan, Board of the People's Commissariat of Azerbaijan, decision of 16 October 1921 The economic failure of War Communism led to a partial return to a monetary economy and new issues of Azerbaijan rubles.
10 January 1923

-17 October 1991

fixed (as part of currency union); used Soviet ruble Union of Soviet Socialist Republics, Board of the Federative Union of the Transcaucasus Soviet Socialist Republics, decision of 10 January 1923 Local note issues ceased as the Transcaucasus became a unified currency zone with Russia, the heart of the USSR.
18 October 1991

-14 August 1992

fixed; used Russian ruble Azerbaijan used the Russian ruble temporarily after declaring independence from the Union of Soviet Socialist Republics.
15 August 1992

-31 December 1993

hard peg, 1 Azeri manat = 10 Russian rubles, and fixed, used Russian ruble (independent) Azerbaijan, Law on the National Bank of Azerbaijan, 7 August 1992 Introduced a national currency at 1 Azeri manat = 10 Russian rubles. In this period, the manat had only a small share of total currency in circulation. Manat comes from the Russian moneta, meaning coin.

RR: Freely falling / freely floating / dual market from 31 December 1992, when data begin. Hyperfloat.

1 January 1994

-23 May 1994

hard peg, multiple rates; official rate 118 Azeri manats = US$1 (IMF: independent float) Eliminated the legal tender status of the Russian ruble.

RR: Freely falling / freely floating / dual market. Hyperfloat.

24 May 1994

-1996

managed float, multiple rates (IMF: independent float) Began setting the official exchange rate as a weighted average of the rates offered by commercial banks.

RR: Freely falling / freely floating / dual market to January 1996. Hyperfloat to December 1994. De facto crawling peg to US dollar from February 1996.

1996

-present

managed float (IMF: independent float, reclassified as managed float 1998) IMF source implies that Azerbaijan eliminated multiple exchange rates in 1996, but does not list a date or give particulars.

RR: De facto crawling peg to US dollar February 1996-December 2001, when data end.



Bahrain



Political sketch

Formerly part of the Federation of Arab Emirates (most of which is now the United Arab Emirates). Independent from the United Kingdom on 15 August 1971.

Bahrain was under Arab control from the 700s until 1521, when Portugal seized it. In 1602, the Persians took Bahrain and held it against assaults by the Portuguese and the Omanis. In 1783 Ahmad ibn Al Khalifah ousted the Persians, and his family has ruled Bahrain ever since. In the 1800s, the United Kingdom intervened several times to suppress piracy by the Bahrainis and to defeat attempts by neighboring Arabs to assert dominion over the islands. In a series of treaties dating from 1820, the United Kingdom gained extensive control over Bahrain. Pearl diving was an important local industry until the 1930s, when the Japanese began producing cultivated pearls at far less cost of recovery than naturally occurring pearls. Oil, the basis of Bahrain's modern economy, was discovered in 1932.

The United Kingdom withdrew its forces from the Persian Gulf in 1971. Bahrain declared itself independent at about the same time, on 15 August 1971. After independence, tensions between the Shiite and Sunni Muslim communities increased, and Shiites, emboldened by Iran's Shiite revolution in 1979, continued to press for greater participation in government. Sheik Isa bin Hamad Al Khalifa, Bahrain's ruler since 1961, died in early 2002 and was succeeded by his son, Sheik Hamad bin Isa Al Khalifa. The son announced his intention to introduce greater democracy. The first elections in three decades were held in 2002, with women gaining the right to vote.



Wars since 1500

Bahrain-Qatari War, 1867.



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Bahrain left the sterling area on 23 June 1973.



Other

In the states of the Arabian Peninsula, gold and silver coins, particular gold British sovereigns and silver Maria Theresa thalers, continued to be widely used into the 1960s even after local note currencies and coins were established. In late 1965, India ceased making rupee coins from the Persian Gulf region convertible into the pound sterling, although notes remained convertible. For a brief period beginning in mid January 1966, Bahrain made its coins available to other Gulf states to fill the gap left by the withdrawal of Indian coins from circulation (Anonymous 2002).

The Indian rupee was widely used in the countries of the Persian Gulf and Arabian Peninsula in the early and mid 1900s (and in some cases even earlier). The government of India established a separate currency, the Gulf rupee, for circulation exclusively outside the country (India, Reserve Bank of India [Amendment] Act, 1 May 1959). In doing so, the government hoped to reduce the drain on its foreign reserves from gold smuggling with the countries of the Persian Gulf. After India devalued the rupee on 6 June 1966, the countries using the Gulf rupee--Oman, Qatar, and what are now the United Arab Emirates--decided to replace the Gulf rupee with national currencies. Kuwait had already done so in 1961, and Bahrain had done so in 1965.

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: In 1991 the system successfully withstood deposit withdrawals during the Persian Gulf War.

Frankel and Rose (1996) list of currency crashes: Bahrain not included.

No exchange rate data in Reinhart and Rogoff (2002).

Qatar, Bahrain, and the United Arab Emirates had an interchangeability agreement for bank notes starting apparently on 28 January 1978. The rates of interchange were 10 Qatari riyals = 1 Bahrain dinar = 10 United Arab Emirates dinars, up to 5,000 Qatari riyals, 500 Bahrain dinars, or 5,000 United Arab Emirates dinars. The agreement lapsed on 5 May 1979 after Qatar revalued its currency.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Anonymous (2002), Bahrain Monetary Agency (1994), Darley-Doran and Bahrain Monetary Agency (1996), Presley and Wilson (1991), Wilson (1987).

Monetary authorities: Bahrain

Dates Type Name Legal basis Remarks
1 July 1920

-21 June 1959

dollarization Indian rupee (issued by government of India [headquarters New Delhi, India] / by central bank Reserve Bank of India [headquarters Bombay [now Mumbai], India] from 1 April 1935) The first bank was the Eastern Bank (headquarters London, England), in Manama, on 1 July 1920. The second bank was the British Bank of the Middle East (headquarters London, England), in Manama, in 1944. The first coins were issued in the 700s, the first modern coins in 1965.
22 June 1959

-15 October 1965

dollarization (another type) Indian-issued Gulf rupee (issued by central bank Reserve Bank of India) India, Reserve Bank of India (Amendment) Act, 1 May 1959 India issued special rupee notes for use around the Persian Gulf to reduce the drain on its foreign reserves from gold smuggling with the Gulf states.
16 October 1965

-22 January 1974

currency board Majlis Naqd al-Bahrayn (Bahrain Currency Board) (headquarters Manama, Bahrain) Bahrain, Bahrain Currency Decree, Decree No. 6 (Finance), 9 December 1964 Bahrain established its own currency. The Indian rupee was withdrawn from circulation in Bahrain 28 January 1966.
23 January 1974

-present

central bank Mu'assasat Naqd al-Bahrayn (Bahrain Monetary Agency) (headquarters Manama, Bahrain) Bahrain, Decree Law No. 23, 5 December 1973 Established a central bank to signal recent political independence and provide for an independent monetary policy during the breakup of the Bretton Woods system. Bahrain joined the IMF on 7 September 1972.



Exchange rate arrangements: Bahrain

Dates Arrangement Legal basis Remarks
about 1900?

-21 June 1959

fixed; used Indian rupee The Indian rupee was the dominant currency of international trade in the Persian Gulf. It became a decimal currency on 1 April 1957.
22 June 1959

-15 October 1965

fixed; used Indian-issued Gulf rupee (1 Gulf rupee = 1 Indian rupee) India, Reserve Bank of India (Amendment) Act, 1 May 1959 India issued special rupee notes for use around the Persian Gulf to reduce the drain on its foreign reserves from gold smuggling with Gulf states.
16 October 1965

-17 November 1967

fixed; 1 Bahrain dinar = 1.86621g gold = UK£0.75 Bahrain, Bahrain Currency Decree, Decree No. 6 (Finance), 9 December 1964; Bahrain Currency (Appointed Day) Decree, Amiri Decree No. 10 (Finance), 7 October 1965 Introduced a national currency at 1 Bahrain dinar = 10 Gulf rupees. The conversion occurred from 16-24 October 1965. The currency board maintained a spread of +/-0.125% around the central parity. Abu Dhabi adopted the Bahrain dinar as its currency 18 June 1966, replacing the Gulf rupee at the rate of 1 Bahrain dinar = 10 Gulf rupees existing before the Indian and Gulf rupees were devalued 7 June 1966. "Dinar" comes from the Latin denarius, an ancient Roman silver coin. The Bahrain dinar was a decimal currency, divided into 1,000 fils.
18 November 1967

-25 June 1972

fixed; 1 Bahrain dinar = 1.86621g gold = UK£0.875 Bahrain Currency Board, notice of 19 November 1967; Bahrain, Finance Department, Decree No. 3 (Finance), 20 November 1967 Bahrain did follow the devaluation of the pound sterling on 18 November 1967. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971.
26 June 1972

-12 February 1973

fixed; 1 Bahrain dinar = US$2.28 = 1.86621g gold (nominally) Bahrain, notice by prime minister, 1 July 1972 Bahrain in effect switched to the US dollar as the anchor currency, at the cross rate prevailing before the United Kingdom floated the pound sterling on 23 June 1972. I say "in effect" because technically the notice did not mention the US dollar, only the gold parity. Currency board annual reports continue to mention the exchange rate with the pound sterling, which the currency board set daily in such a way as to maintain the gold parity; the first mention of the US dollar rate is the 1974 annual report of the new central bank.
13 February 1973

-22 January 1974

fixed; 1 Bahrain dinar = US$2.53 = 1.86621g gold (nominally) Bahrain did not follow the devaluation of the US dollar on 13 February 1973. Bahrain registered a gold parity with on IMF 31 March 1973 and adopted wider margins as of that date.
23 January 1974

-25 January 1978

hard peg; 1 Bahrain dinar = US$2.53 = 1.86621g gold (nominally) A central bank replaced the currency board.
26 January 1978

-31 March 1978

hard peg; 0.47619 Bahrain dinar = 1 SDR, or 1 Bahrain dinar = 1.86621g gold (nominally) Switched to the SDR as the anchor currency, at the prevailing cross rate with the US dollar (approximately 1 Bahrain dinar = US$2.57). The US dollar remained the intervention currency.
1 April 1978

-14 August 1978

hard peg; 0.47619 Bahrain dinar = 1 SDR International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members.
15 August 1978

-December 1980

band; 0.47619 Bahrain dinar +/-7.25% = 1 SDR Widened exchange rate margins.
December 1980

-24 December 2001

hard peg; officially 0.47619 Bahrain dinar = 1 SDR; in practice, 1 Bahrain dinar = US$ 2.6596 or 0.377 Bahrain dinar = US$1 (IMF: pegged within horizontal bands, reclassified to conventional peg 31 March 1999) In practice, Bahrain pegged its currency to the US dollar henceforth.
25 December 2001

-present

hard peg; 1 Bahrain dinar = US$ 2.659 Bahrain, Decree No. 48, 25 December 2001 Officially switched to the US dollar as the anchor currency after a long period of using it as the anchor in practice. This measure was part of an agreement by member nations of the Gulf Co-operation Council to peg to the US dollar as a step toward establishing a common currency by 2010.



Bangladesh



Political sketch

Formerly East Pakistan. Independent from Pakistan on 16 December 1971.

Muslim raids began on northern India at the close of the 900s. In 1338 Bengal, a region that includes Bangladesh, was able to separate itself from the Delhi sultanate and remain independent until its conquest by the Mughals in 1576. During this period the majority of the population became Muslims. In 1651, the British East India Company established a factory (trading settlement) in Bengal. At the Battle of Plassey in 1757, Robert Clive, acting for the company, defeated the ruler of Bengal and placed in office a successor more sympathetic to British interests. By 1765 the British East India Company had secured the revenue rights for Bengal, which marked the beginning of the British Empire's rule in India. The Indian Mutiny (Sepoy Rebellion) of 1857-1858 threatened British dominance and led the British government to take over India from the East India Company, effective 1 November 1858. In 1905 the British created the Muslim-dominated province of East Bengal to reduce friction with the mostly Hindu surrounding area. In 1912 the British reversed the partition, which had been opposed by Hindus, but problems between Hindus and Muslims continued. When Britain granted independence to India and Pakistan on 15 August 1947, East Bengal became East Pakistan. What is now Pakistan was West Pakistan.

Many Bengalis wanted independence from West Pakistan, which was the dominant part of the country. In 1970 the pro-independence Awami League won all East Pakistan seats, and hence a majority of seats nationwide in the National Assembly. On 1 March 1971 the Pakistani government indefinitely postponed the meeting of the Assembly. Violence erupted and guerrilla warfare resulted. Millions of refugees fled to India, whose military then intervened and guaranteed defeat for West Pakistan. On 16 December 1971, East Pakistan became independent as Bangladesh. Bangladesh was and is very poor. The early years of the new nation were marked by political instability, with the assassinations of two presidents and coups. Since 1991 Bangladesh has had civilian rule, though it has been marked by turbulence. After achieving independence, Bangladesh had a heavily government-controlled economy, which failed to deliver economic growth. Starting in 1975 controls gradually loosened. Bangladesh's longstanding extreme poverty has abated moderately as modern agricultural techniques and growing exports from the clothing industry have improved the standard of living. An insurgency in the Chittagong Hill Tracts region by mainly Buddhist tribes began in 1973 and ended only in 1997.



Wars since 1500

Before 1947, see India; Indian Civil War of 1947-1948 (by Hindus and Muslims as India was partitioned); Indo-Pakistani War of 1971; Pakistani Civil War of 1971 (Bangladeshis against Pakistan); Bangladeshi Civil War (Jumma Insurgency) of 1973-1997.



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Bangladesh left the sterling area on 23 June 1972.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: entire banking system technically insolvent late 1980s-1990s.

Frankel and Rose (1996) list of currency crashes: 1975.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Hossain and Rashid (1997).

Monetary authorities: Bangladesh

Dates Type Name Legal basis Remarks
1 July? 1846

-31 December 1861

free banking (as part of currency union) one or more banks various bank charters and articles of association Bangladesh was part of British India from 1765-14 August 1947. The first bank was apparently the Bank of Dacca (headquarters Dacca, British India [now Dhaka, Bangladesh]), established and perhaps opened in Dacca on 1 July 1846. It lacked a charter and so operated under articles of association or a similar instrument. The second bank is unknown to me. The first coins were issued perhaps about 100 BC, and definitely by 625 AD.
1 January 1862

-31 March 1935

government issue (as part of currency union) government of India (headquarters New Delhi, India) India, Paper Currency Act, No. 19 of 1861 The British government took control of India from the British East India Company in 1858. The English economist James Wilson influenced the establishment of a government monopoly of note issue in India according to rules like those under which the Bank of England then issued notes.
1 April 1935

-14 August 1947

central bank (as part of currency union) Reserve Bank of India (headquarters Bombay [now Mumbai], India) India, Reserve Bank of India Act, 6 March 1934 India created a central bank to provide greater elasticity of note issue and greater ability to conduct a managed monetary policy. India joined the IMF on 27 December 1945, as an original member.
15 August 1947

-30 June 1948

dollarization (as part of currency union) Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India]) India, Governor-General, Pakistan (Monetary System and Reserve Bank) Order, 14 August 1947; Pakistan, Pakistan Monetary System and Reserve Bank (Amendment) Order, 31 March 1948 When India was partitioned on 15 August 1947, present-day Bangladesh became the eastern part of Pakistan, and remained so through 15 December 1971. Pakistan was part of India to 14 August 1947. Pakistan continued to use the Indian rupee, issued by Reserve Bank if India, until it could establish its own central bank. The Reserve Bank of India issued distinct notes and coins for Pakistan starting on 1 April 1948.
1 July 1948

-15 December 1971

central bank (as part of currency union) Bank Daulat-e-Pakistan or State Bank of Pakistan (headquarters Karachi, West Pakistan [now simply Pakistan]) Pakistan, Governor-General, State Bank of Pakistan Order, 12 May 1948 Pakistan established its own central bank to signal its political independence from the United Kingdom and India. Pakistan joined the IMF on 11 July 1950. It nationalized central bank and other domestically owned banks as of 1 January 1974 (Pakistan, Banks [Nationalisation] Act, 1974). Foreign banks were not nationalized, but they were prohibited from establishing new branches.
16 December 1971

-31 December 1971

dollarization Pakistani rupee (issued by central bank State Bank of Pakistan [headquarters Karachi, Pakistan]) After gaining independence from Pakistan, Bangladesh briefly continued using Pakistani currency until it could establish its own central bank.
1 January 1972

-present

central bank Bangladesh Bank or Bmldésa Bynka (headquarters Dacca [Dhaka], Bangladesh)

Bangladesh, Bangladesh Bank (Temporary ) Order, Presidential Order of 25 December 1971; Bangladesh Bank Order, Presidential Order No. 127, 31 October 1972 The new national currency, the taka, currency began to exist as a unit of account 1 January 1972, but the first notes were not issued until 4 March 1972 and the first coins not until 15 September 1973. In the meantime, Bangladesh overstamped Pakistani notes as a temporary measure. The government nationalized all privately owned banks on 26 March 1972 (Bangladesh, Banks [Nationalisation] Order 1972). Bangladesh joined the IMF on 17 August 1972.


Exchange rate arrangements: Bangladesh

Dates Arrangement Legal basis Remarks
to 31 December 1835? fixed; 1 Indian rupee = 11.34g silver This was the traditional weight of the rupee. (The word "rupee"comes from a Sanskrit word meaning "coined silver;" there is an earlier Indo-European word rupa meaning "cattle," which were long used as money in many places). The three presidency zones of the British colonial era initially had separate rupees: the sicca rupee (Calcutta), the old Bombay rupee, and the Madras arcot rupee, each having a slightly different weight. The (British) East India Company tried unsuccessfully to put India on the gold standard by fixing a legal ratio between gold and silver in Bengal in 1766. However, this attempt ceased in 1803 (Bengal, Regulation No. 45 of 1803). The custom was to deduct value for each year since the mint year on a coin to account for wear and tear. Besides the rupee, commonly used units of account were the lakh (100,000 rupees) and the crore (10 million rupees). These units are still used today in Indian vernacular. In the traditional system of Indian coinage, 1 rupee = 16 annas = 64 pice = 192 pies.
1 January? 1836

-31 December 1852

fixed (as part of currency union); 1 Indian rupee = 10.6918g silver (= 0.712787g gold) India, Act No. 17 of 1835 The East India Company made the Madras rupee of the weight established in 1818 the standard for all of India; it was therefore called the "Company's rupee." Calcutta (sicca) rupees ceased to be legal tender as of 1 January 1838 (East India Company, Act No. 13 of 1836). The 1835 act also provided for coining the gold mohur, which was done beginning 1 September 1835. East India Company, proclamation of 13 January 1841, explicitly allowed mohurs to be used in paying the government, though they were not legal tender for paying private persons. The effect was to make India quasi bimetallic at a ratio of 15 units silver =1 unit gold.
1 December 1853

-31 December 1861

fixed (as part of currency union); 1 Indian rupee = 10.6918g silver India, notification of 1852 concerning coinage Gold mohurs ceased to be legal tender for paying the government, so India was unequivocally on the silver standard.
1 January 1862

-25 June 1893

hard peg (as part of currency union); 1 Indian rupee = 10.6918g silver India, Paper Currency Act, No. 19, 18 July 1861 Government issue replaced free banking. In 1862 the coinage was transferred from the East India Company to the Indian colonial government (India, Act No. 13 of 1862). In 1876, the government of India was allowed to admit coins of native states as legal tender upon certain conditions (India, Act No. 9 of 1876).
26 June 1893

-31 December 1897?

managed float (limping gold standard) (as part of currency union) India, Act No. 8, 26 June 1893 India detached from the silver standard as a prelude to a planned full-fledged gold standard. The government announced it would accept gold at a rate such that UK 1 shilling 4 pence (16 pence) = 1 Indian rupee. This set an upper limit to the appreciation of the rupee, whose market rate in 1893 was about UK 1 shilling 2.5 pence (14.5 pence). Recall that in the monetary system of the United Kingdom at the time, £1 = 12 shillings (s.) and 1 shilling = 12 pence (d.), so £1 = 240d.
1? January 1898

-August 1917

hard peg (as part of currency union); 15 Indian rupees = UK£1, or 1 Indian rupee = UK 1 shilling 4 pence (16 pence) India, Indian Coinage and Paper Currency Act, No. 22 of 1899 India established a pound sterling exchange standard instead of a gold standard. Rupee coins continued to contain the same amount of silver as before. The act of 1899 gave legal tender status to British gold sovereign coins (worth UK£1) and half-sovereigns.
August 1917

-1 February 1920

hard peg (as part of currency union); 1 Indian rupee = 10.6918g silver The price of silver rose against gold, because of demand for silver for use in munitions during the First World War. Rupee coins became worth more as metal than the exchange rate with the pound sterling, and the sterling exchange standard broke down. The pound sterling continued to be the intervention currency throughout the 1920s and beyond.
2 February 1920

-23 June 1920

hard peg (as part of currency union), 1 Indian rupee = 0.732238g gold India, Act No. 36 of 1920 This exchange rate made the Indian rupee worth UK£0.10 at the pre-First World War exchange rate of the pound sterling into gold. At this time, however, the pound sterling was floating against gold.
24 June 1920

-27 September 1920

hard peg (as part of currency union); 10 Indian rupees = UK£1, or 1 Indian rupee = UK 2 shillings (24 pence) Silver passed its peak of appreciation against gold earlier in 1920 and was depreciating rapidly. This exchange rate amounted to a devaluation, since the floating pound sterling was exchanging at less than its pre-First World War gold value.
28 September 1920

-October 1924

hard peg (as part of currency union); 1 Indian rupee = 10.6918g silver The government of India ceased supporting the previous exchange rate with the pound sterling, which now appeared to overvalue the rupee.
October 1924

-23 March 1927

soft peg (as part of currency union); 1 Indian rupee = UK 1 shilling 6 pence (18 pence) The government started supporting the exchange rate in practice. The peg was a bit wobbly at times but stayed close to the value stated. The United Kingdom returned to the gold standard on 27 April 1925.
24 March 1927

-23 September 1927

hard peg (as part of currency union); 1 Indian rupee = UK 1 shilling 6 pence (18 pence) = 0.548925g gold, or 13-1/3 Indian rupees = UK£1 India, Indian Paper Currency Act, March 1927 The act officially defined the Indian rupee in terms of gold.

RR: Peg to pound sterling / freely falling November 1941-October 1943.

24 September 1927

-17 December 1946

hard peg (as part of currency union); 13-1/3 Indian rupees = UK£1, or 1 Indian rupee = UK 1 shilling 6 pence (18 pence) India, Governor-General in Council, ordinance of 21 September 1927; government announcement of 24 September 1927 The ordinance removed the obligation of the Indian 1927 act to sell gold or pounds sterling. The announcement specified that the rupee would be pegged to the pound sterling at the new rate.
18 December 1946

-30 June 1948

hard peg (as part of currency union); 13-1/3 Indian rupees = UK£1, or 3.308852 Indian rupees = US$1, or 1 Indian rupee = UK 1 shilling 6 pence (18 pence) = 0.268601g gold India registered a gold parity with the IMF. What are now Bangladesh and Pakistan were part of British India from the 1700s to 14 August 1947; they became independent on 15 August 1947 as Pakistan (Bangladesh being East Pakistan, present-day Pakistan being West Pakistan), but continued to use the Indian rupee for a while.
1 July 1948

-19 September 1949

hard peg (as part of currency union); 13-1/3 Pakistani rupees = UK£1 (= 13-1/3 Indian rupees), or 1 Pakistani rupee = UK 1 shilling 6 pence possibly Pakistan, Pakistan Monetary System and Reserve Bank (Amendment) Order, 31 March 1948 Pakistan introduced its own currency.
20 September 1949

-18 March 1951

hard peg (as part of currency union); 1 Pakistani rupee = UK 2 shillings 1-57/64 pence, or approximately 9.27 Pakistani rupees = UK£1, or 3.31 Pakistani rupees = US$1 Did not follow the devaluation of the pound sterling on 18 September 1949.
19 March 1951

-30 July 1955

1 Pakistani rupee = UK 2 shillings 1-57/64 pence = 0.268601g gold, or approximately 9.27 Pakistani rupees = UK£1, or 3.30852 Pakistani rupees = US$1 Pakistan registered a gold parity with the IMF.
31 July 1955

-14 January 1959

hard peg (as part of currency union); 4.7619 Pakistani rupees = US$1, or 13-1/3 Pakistani rupees = UK£1, or 1 Pakistani rupee = UK 1 shilling 6 pence = 0.186621g gold This devaluation restored the old exchange rate of the Pakistani rupee with the pound sterling and made it again equal to the Indian rupee, which had quickly followed Britain's devaluation of 18 September 1949.
15 January 1959

-17 November 1967

hard peg (as part of currency union), multiple rates; 13-1/3 Pakistani rupees = UK£1, or 4.7619 Pakistani rupees = US$1, or 1 Pakistani rupee = UK 1 shilling 6 pence = 0.186621g gold Introduced the Export Bonus Scheme of vouchers. The Pakistani rupee became a decimal currency on 1 January 1961.
18 September 1967

-16 November 1971

hard peg (as part of currency union), multiple rates; approximately 14.29 Pakistani rupees = UK£1, or 4.7619 Pakistani rupees = US$1, or 1 Pakistani rupee = UK 1 shilling 9 pence = 0.186621g gold Did not follow the devaluation of pound sterling on 18 November 1967. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971.
17 September 1971

-15 December 1971

hard peg (as part of currency union), multiple rates; 4.7619 Pakistani rupees = US$1, or 1 Pakistani rupee = 0.186621g gold (nominally) Switched to the US dollar as the anchor currency.

RR: Parallel market premium peaked at 212% in December 1971.

16 December 1971

-31 December 1971

fixed; used Pakistani rupee Continued to use the Pakistani rupee temporarily after becoming independent of Pakistan. The Pakistani rupee had been a decimal currency since 1 January 1961.
1 January 1972

-5 July 1972

hard peg; 18.9677 Bangladeshi taka = UK£1 Introduced a national currency, at 1 Bangladeshi taka = 1 (West) Pakistani rupee. The taka was the name of a coin that existed from before the period of British rule, and the Bengali word comes from a Sanskrit word meaning "stamped coin." The taka was a decimal currency from the start. Gold convertibility for all countries had ended in practice when the United States abandoned the gold standard on 15 August 1971. Bangladesh never registered a gold parity with the IMF.
6 July 1972

-26 July 1972

hard peg; official rate 18.9677 Bangladeshi taka = UK£1, effective rate 18.8001 Bangladeshi taka = UK£1 Modified the effective exchange rate slightly to compensate for the weakness of the pound sterling, which had depreciated from UK£1 = US$2.61 in May 1972 to US$2.44 in June 1972.
27 July 1972

-18 May 1975

hard peg, dual rate; official rate 18.9677 Bangladeshi taka = UK£1, effective rate 18.8001 Bangladeshi taka = UK£1 Introduced a second exchange rate of 30 Bangladeshi taka = UK£1 for workers' remittances. A currency confiscation occurred on 7 April 1975. The confiscation demonetized 100-taka notes. Amounts over 800 taka were paid in nonnegotiable, nontransferable government bonds.
19 May 1975

-25 April 1976

hard peg; 30 Bangladeshi taka = UK£1 Bangladesh, government announcement of 16 May 1975 Devalued and unified the exchange rate.
26 April 1976

-6 June 1976

soft peg, dual rate; official rate 28.10 Bangladeshi taka = UK£1 Revalued versus the pound sterling, at the time a weak currency, and adopted wider margins. Sometime in 1976 a separate exchange rate for remittances was established, but neither the central bank report nor IMF sources specify when, so I have arbitrarily dated it here.
7 June 1976

-15 August 1976

soft peg, dual rate; official rate 26.70 Bangladeshi taka = UK£1 Bangladesh Bank, Foreign Exchange Circular No. 66, June 1976 Revalued again versus the weak pound sterling. The goal of this and the next several changes in the exchange rate was to maintain a more or less stable cross rate against the US dollar.
16 August 1976

-29 September 1976

soft peg, dual rate; official rate 26.16 Bangladeshi taka = UK£1 Revalued slightly.
30 September 1976

-1 November 1976

soft peg, dual rate; official rate 26.70 Bangladeshi taka = UK£1 Devalued slightly.
2 November 1976

-30 December 1976

soft peg, dual rate; official rate 25.45 Bangladeshi taka = UK£1 Bangladesh Bank, Foreign Exchange Circular No. 152, 1976 Revalued.
31 December 1976

-17 January 1977

soft peg, dual rate; official rate 25.975 Bangladeshi taka = UK£1 Bangladesh Bank, Foreign Exchange Circular No. 177, 1976 The first in what would become a series of devaluations. The selling rate was 26 Bangladeshi taka = UK£1.
18 January 1977

-16 October 1977

soft peg, dual rate; official rate 26.70 Bangladeshi taka = UK£1 Devalued.
17 October 1977

-8 November 1977

soft peg, dual rate; official rate 26.925 Bangladeshi taka = UK£1 Devalued.
9 November 1977

-8 December 1977

soft peg, dual rate; official rate 27.375 Bangladeshi taka = UK£1 Devalued.
9 December 1977

-29 January 1978

soft peg, dual rate; official rate 27.625 Bangladeshi taka = UK£1 Devalued.
30 January 1978

-23 April 1978

soft peg, dual rate; official rate 28.725 Bangladeshi taka = UK£1 Devalued.
24 April 1978

-21 August 1978

soft peg, dual rate; official rate 28.025 Bangladeshi taka = UK£1 Revalued slightly.
22 August 1978

-17 September 1978

soft peg, dual rate; official rate 28.525 Bangladeshi taka = UK£1 Devalued.
18 September 1978

-22 October 1978

soft peg, dual rate; official rate 29.525 Bangladeshi taka = UK£1 Devalued.
23 October 1978

-14 January 1979

soft peg, dual rate; official rate 30.525 Bangladeshi taka = UK£1 Devalued.
15 January 1979

-15 April 1979

soft peg, dual rate; official rate 31.125 Bangladeshi taka = UK£1 Devalued.
16 April 1979

-27 May 1979

soft peg, dual rate; official rate 32.025 Bangladeshi taka = UK£1 Devalued.
28 May 1979

-12 August 1979

soft peg, dual rate; official rate 33 Bangladeshi taka = UK£1 Devalued.
13 August 1979

-30 June 1985

basket, dual rate Pegged to a basket of major currencies with margins of fluctuation of +/-2.25%. The initial exchange rate was 34.7118 Bangladeshi taka = UK£1. The pound sterling remained the intervention currency. The central bank narrowed the margins to +/-1% on 27 October 1980. Bangladesh switched to the US dollar as its intervention currency 11 January 1983, at an initial rate of 24.52 Bangladeshi taka = US$1.
1 July 1985

-31 December 1991

basket, multiple rates Changes in export rate scheme introduced multiple exchange rates.
1 January 1992

-present

basket Unified the exchange rate. Widened the buy/sell margin from 0.20 taka to 0.30 taka 5 July 1998. Annual reports of the central bank from 1996/1997 to 1999/2000 say that the main objective of exchange rate policy is to maintain the stability of the real effective exchange rate against a basket of currencies of 15 major trading partners. In practice, the taka has been periodically depreciated against the US dollar.



Bhutan



Political sketch

Bhutan probably first became a distinct political entity in the 1600s, when a Tibetan Buddhist priest named Sheptoon La-Pha became king. Successors were persons thought to be reincarnations of the deceased king. In 1907, the monarchy became hereditary, as it has remained since. In 1865 the British invaded Bhutan from neighboring India and incorporated Bhutan into their sphere of influence. In 1910 Bhutan agreed to be guided by Britain in its foreign affairs in return for an annual British subsidy. In 1949 India took over the United Kingdom's role, and the invasion of neighboring Tibet by China in 1950 further strengthened Bhutan's ties with India. Modern roads connecting Bhutan with India in the 1960s ended Bhutan's historic isolation. Bhutan has proceeded cautiously with economic development and remains a predominantly agricultural country. Bhutan is a monarchy, but a constitution that would convert it into a constitutional monarchy is being drafted; the constitution is expected to be presented for ratification in 2005.



Wars since 1500

Battle of Dena Drug Dhhoeding, 1617 (Bhutan against Tibet); Mongol Invasion of Bhutan, 1643; First Tsang Chinese Invasions of Bhutan, 1629; Second Tsang Chinese Invasions of Bhutan, 1634; Third Tsang Chinese Invasions of Bhutan, 1638; First Tibetan Invasion of Bhutan, 1657; Second Tibetan Invasion of Bhutan, 1714; Bhutanese Invasion of Sikkim, 1676-1700; Bhutanese Invasion of Cooch Behar, 1772; Bhutanese-British War of 1774; Bhutanese-British War (Duar War) of 1865; Bhutanese Civil Wars of 1865-1885.



Convertibility





Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: nonperforming loans amounted to 7% of total loans in early to mid 1990s.

Frankel and Rose (1996) list of currency crashes: 1991.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Bank of Bhutan (1992), Bhutan (1995?).



Monetary authorities: Bhutan

Dates Type Name Legal basis Remarks
28 May 1968

-5 April 1974

dollarization Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India]) Bhutan, Bank of Bhutan royal charter, 1968 The first bank was the government-owned Bank of Bhutan (headquarters Puntsholing, Bhutan), in Puntsholing, on 28 May 1968. The Indian rupee was in limited use long before this, but barter predominated. The second bank was the Bhutan National Bank (headquarters Thimpu, Bhutan), in Thimpu, in 1992. The first coins were issued about 1790.
6 April 1974

-31 October 1983

government issue alongside dollarization Bhutan Ministry of Finance (headquarters Thimphu, Bhutan) alongside Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India) Introduced a national currency apparently to capture seigniorage. Bhutan joined the IMF on 28 September 1981.
1 November 1983

-present

central bank alongside dollarization [Dzongkha name unknown to me] (Royal Monetary Authority of Bhutan) (headquarters Thimphu, Bhutan) alongside Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India) Bhutan, Royal Monetary Authority of Bhutan Act, 4 August 1982 Established a central bank to take over the government note issue. The Indian rupee is also legal tender; it remained the dominant currency in the 1980s.



Exchange rate arrangements: Bhutan

Dates Arrangement Legal basis Remarks
to 5 April 1974 predominantly barter; also used Indian rupee and some local coins Bhutan's trade was and remains almost entirely with or through India. Locally issued coins called tikchungs were also used. A tickchung was worth half a rupee. Bhutan decimalized on 1 April 1957, the date India introduced decimal coins.
6 April 1974

-present

1 Bhutan ngultrum = 1 Indian rupee Introduced a national currency. The word ngultrum comes from the Bhutanese Dzongkha language word ngul, meaning "silver," and trum, probably a Hindi word, meaning "money." The ngultrum was a decimal currency from the start.



British Indian Ocean Territory



Political sketch

A British territory.

What is now the British Indian Ocean Territory was part of Mauritius and Seychelles until it was created on 8 November 1965. Its constituent parts were the Aldabra Islands and the Farquhar and Desroches islands (all purchased from the Seychelles) and the Chagos Archipelago (formerly a dependency of Mauritius). The colony was created to the United Kingdom and United States to have a secure base in the Indian Ocean. A large military base was built on Diego Garcia, the southernmost island of the Chagos Archipelago, and the island's transient population was relocated to Mauritius and the Seychelles. On 28-29 June 1976, the islands purchased from the Seychelles were returned to the newly independent Republic of Seychelles. Only the Chagos Archipelago remained. Administrative headquarters were at Victoria, Seychelles, during 1965-1976, and after 1976 they were in London. Today (2004) Diego Garcia remains an important military base. The territory has no permanent population, but the base is staffed by roughly 3,000 British and U.S. military personnel and civilian contractors.



Wars since 1500

To 1965, see Mauritius; no wars since 1965.



Convertibility



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: None.

Frankel and Rose (1996) list of currency crashes: British Indian Ocean Territory not included.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Apparently none.

Monetary authorities: British Indian Ocean Territory

Dates Type Name Legal basis Remarks
1919

-7 November 1965?

dollarization (as part of currency union) government of Seychelles / Seychelles Treasurer from 1 February? 1936 Seychelles, Paper Currency Ordinance, 1919; Seychelles, Currency Notes Ordinance, Ordinance No. 2, 30 January 1936 During this period, what is now British Indian Ocean Territory was part of Seychelles. I have begun the monetary history of the British Indian Ocean Territory from this date because it is when Seychelles began issuing its own currency; before this it used Mauritius currency.
8 November 1965?

-present

dollarization (another type) (as part of currency union) pound sterling (issued by central bank Bank of England [headquarters London, England]) British Indian Ocean Territory was separated from Seychelles and became a British territory as opposed to a British colony.



Exchange rate arrangements: British Indian Ocean Territory

Dates Arrangement Legal basis Remarks
1919

-7 November 1965?

fixed (as part of currency union); used Seychelles rupee Seychelles, Paper Currency Ordinance, 1919 During this period, what is now British Indian Ocean Territory was part of Seychelles. I have begun the monetary history of the British Indian Ocean Territory from this date because it is when Seychelles began issuing its own currency; before this it used Mauritius currency.
8 November 1965?

-present

fixed; uses pound sterling British Indian Ocean Territory was separated from Seychelles and became a British territory as opposed to a British colony. The US dollar is also used on the base by US personnel, apparently.



Brunei



Political sketch

Also known as Brunei Darussalam. Independent from the United Kingdom on 1 January 1984.

In the 1400s Brunei broke away from Javanese rule and became an independent sultanate with a mostly Muslim population. By the late 1500s Brunei's power waned as the Portuguese and Dutch exerted influence and the people of the nearby Sulu Archipelago began to control much of the north coast of Borneo previously possessed by Brunei. In the early 1600s the Dutch established settlements in southern Borneo, through by the 1800s British influence had superseded it. By the 1800s Brunei included only Sarawak, present-day Brunei, and part of North Borneo (now Sabah). In 1841 a revolt took place against the sultan of Brunei. A British soldier who helped suppress the revolt, James Brooke, was then proclaimed governor of Sarawak. In 1847 the sultan of Brunei signed a commercial treaty with the United Kingdom. In 1877 Brunei leased its portion of North Borneo was leased to a group of British merchants, with control passing to the British North Borneo Company a few years later. In 1888 Brunei was placed under British protection. During the Second World War, Brunei was occupied by Japanese forces in December 1941 and was liberated by Australian forces on 13 June 1945. The sultan negotiated a new treaty with the British in 1979, and Brunei became independent on 1 January 1984. Present-day Brunei is quite small, but has large reserves of oil (discovered in 1914; a field was discovered in 1929) and natural gas (discovered in 1965), making it one of the world's wealthiest nations per person. Brunei remains a monarchy.



Wars since 1500

Second World War in the Pacific, 1941-1945 (United Kingdom, United States, Netherlands, China, and allies against Japan); Brunei Rebellion, 1962.



Convertibility

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Brunei left the sterling area on 23 June 1972.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Minor banking crisis in mid 1980s, including failure of second-largest bank in 1986.

Frankel and Rose (1996) list of currency crashes: Brunei not included.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Bányai (1974), Fujita (2003), King (1957), Skully (1984).



Monetary authorities: Brunei

Dates Type Name Legal basis Remarks
1867

-22 February 1942

dollarization (no banks) Straits (Singapore) dollar (issued by currency board, later currency board-like Board of Commissioners of Currency Straits Settlements) / Malayan dollar from 1 January 1938? (issued by currency board Board of Commissioners of Currency, Malaya) (headquarters for both Singapore) unknown The first coins were issued in the 1500s. I have listed Brunei's monetary authority despite the lack of commercial banks to provide background for the Japanese occupation period.
23 February 1942

-31 March 1943

occupation currency alongside dollarization (no banks) Japanese (military) government (headquarters Tokyo, Japan) alongside Malayan dollar (issued by currency board Board of Commissioners of Currency, Malaya) (headquarters Singapore) Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 The Japanese issued occupation currency upon conquering Brunei on 16 December 1941, during the Second World War. The decree law of 1942 allowed the continued use of the Malayan dollar. However, Malayan dollars soon went out of circulation because they were hoarded as a more reliable store of value than Japanese military currency.
1 April 1943

-4 September? 1945

occupation currency (issued by joint central bank) Nampo Kaihatsu Kinko (Southern Development Bank) (headquarters Tokyo, Japan) Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank was the Japanese occupation central bank for present-day Brunei, Burma, Indonesia, Malaysia, Philippines, and Singapore.
5 September? 1945

-31 December 1951

dollarization (no banks until April 1947) Malayan dollar (issued by currency board Board of Commissioners of Currency, Malaya [headquarters Singapore]) Allied military administration (under lieutenant-general of First Australian Corps), British Borneo, Martial Law Proclamation, No. 1, 10 June 1945 Allied forces reoccupied Brunei on 13 June 1945, near the end of the Second World War. The Martial Law Proclamation restored laws in force before Japanese occupation. The British military administration resumed exchange into pounds sterling. The currency board officially resumed operations on 1 April 1946. The first bank was the Hongkong and Shanghai Banking Corporation, in Brunei Town (now Bandar Seri Begawan), in April 1947. The second bank was the Chartered Bank of India, Australia and China (headquarters London, England), in Brunei Town (now Bandar Seri Begawan), about 1957. For some years the Chartered Bank had a branch in Miri, Sarawak, just over the border from Brunei.
1 January 1952

-11 June 1967

joint currency board Board of Commissioners of Currency, Malaya and British Borneo (headquarters Singapore / Kuala Lumpur, Malaya [later Malaysia] from July 1962) Malaya British Borneo Currency Agreement, 1950; Malaya British Borneo Currency Agreement, 1960 Brunei, North Borneo, and Sarawak became members of the currency board and were entitled to share its seigniorage.
12 June 1967

-1976

own currency board Brunei Currency Board or Lembaga Matawang Brunei (headquarters Brunei Town [known as Bandar Seri Begawan from 4 October 1970], Brunei) Brunei, Currency Act of 1967 Brunei established its own currency board when Singapore and Malaysia decided to separate their formerly united currencies. Notes and coins of the Board of Commissioners of Currency, Malaya and British Borneo ceased to be legal tender in Brunei, Malaysia, and Singapore effective 16 January 1969.
1976

-present

currency board-like Brunei Currency Board or Lembaga Matawang Brunei (headquarters Bandar Seri Begawan, Brunei) The Brunei Currency Board gained certain powers making it less orthodox. Brunei joined the IMF on 10 October 1995.



Exchange rate arrangements: Brunei

Dates Arrangement Legal basis Remarks
1867

-31 December 1937?

fixed; used Straits dollar The Straits (Singapore) dollar, introduced as a unit of account in Singapore on 1 April 1867, was widely used in the parts of Borneo under British influence. It was a decimal currency. Before this, other silver dollars were apparently widely used.
1 January 1938?

-22 February 1942

fixed; Malayan $60 = UK£7, or Malayan $1 = UK 2 shillings 4 pence Brunei, a law of 1939 corresponding to Straits Settlements [Singapore, etc.], Currency Ordinance, No. 23 of 1938 The Malayan dollar replaced Straits dollar when the Singapore-Malay currency union began; Malayan $1 = Straits $1.
23 February 1942

-31 March 1943

hard peg; Japanese military $1 = 1 Japanese yen = Malayan $1 Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 Initially, the Malayan dollar continued to be accepted by Japanese occupation forces, though it was inconvertible into the pound sterling. The Malay currency board held its assets in London for safekeeping during the Second World War. The convertibility of the Japanese military dollar into Japanese yen was limited. The exchange rate between the Japanese military dollar and the Malay dollar was notional; on the black market, the military dollar depreciated rapidly against the still-hoarded Malayan dollar. The prewar exchange rate had been about 2 Japanese yen = Malayan $1.
1 April 1943

-4 September? 1945

hard peg (as part of currency union); Southern Development Bank $1 = 1 Japanese yen Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank, the Japanese occupation central bank for southeast Asia, began issuing notes. On the black market, the Southern Development Bank dollar depreciated rapidly against the still-hoarded Malayan dollar, to which it remained officially equal.
5 September? 1945

-31 December 1951

fixed; used Malayan dollar Allied military administration (under lieutenant-general of First Australian Corps), British Borneo, Martial Law Proclamation, No. 1, 10 June 1945 Allied forces reoccupied Brunei on 13 June 1945, near the end of the Second World War. The Martial Law Proclamation restored laws in force before Japanese occupation. The British military administration resumed exchange into pounds sterling. The Malay currency board officially resumed operations on 1 April 1946. Japanese occupation currency was declared to be worthless.
1 January 1952

-11 June 1967

fixed (as part of currency union); Malayan $60 = UK£7, or Malayan $1 = UK 2 shillings 4 pence Malaya British Borneo Currency Agreement, 1950; Malaya British Borneo Currency Agreement, 1960 Brunei joined the currency board that issued the Malayan dollar.
12 June 1967

-1976

fixed; Brunei $1 = Singapore $1 Brunei, Currency Act of 1967 Brunei uses the Singapore dollar as its anchor currency, and Brunei and Singapore have a currency interchangeability agreement. The Brunei dollar was a decimal currency from the start.
1976

-present

hard peg; Brunei $1 = Singapore $1 Replaced the currency board with a currency board-like system.



Burma (Myanmar)



Political sketch

Burma is also known as Myanmar. Independent from the United Kingdom on 4 January 1948.

Burma was first united in the mid 11th century. It was periodically split up and reunified thereafter, and its last ruling dynasty was founded in the mid 1700s. The United Kingdom went to war with Burma in the 1800s following Burmese occupation of Assam (now part of eastern India). In three wars from 1824 to 1885, the British conquered all of Burma. Under British control, Burma became a province of India. In 1937 mostly Buddhist Burma became a separate colony from mostly Hindu India. Japanese troops occupied Burma during the Second World War, beginning their invasion 11 December 1941 and later retreating but not finally surrendering until Japan itself did in August 1945.

After the war, British rule resumed until Burma became independent on 4 January 1948, less than half a year after India had become independent. A military coup in March 1962 established a revolutionary council intent on creating a centrally planned economy. By the late 1980s, governmental corruption and mismanagement had turned Burma into one of the world's poorest countries. Long-simmering public dissatisfaction erupted in 1987-1988 into antigovernment riots. On 27 May 1990, opposition parties won decisively in national elections, but the army refused to cede control. The military dictatorship continues in power today (2004). Burma's economy is based on agriculture and the extraction of natural resources to benefit its military rulers. The name Myanmar, in use since 1989, was not a change of the country's name in the Burmese language, but just a different translation of the existing Burmese name.



Wars since 1500

Burmese Civil War of 1527; Burmese Civil War of 1535-1546; Siamese-Burmese War of 1548; Burmese Civil War of 1551-1559; Burmese-Laotian War of 1558; Siamese-Burmese War of 1563-1569; Burmese-Laotian War of 1564-1565; Burmese-Laotian War of 1571-1575; Burmese-Laotian War of 1581-1592; Siamese-Burmese War of 1584-1592; Siamese-Burmese War of 1593-1600; Burmese Civil War of 1599; Siamese-Burmese War of 1607-1618; Burmese-Portuguese War of 1613; Burmese-Chinese War of 1658-1661; Siamese-Burmese War of 1660-1662; Burmese-Manipuri War of 1714-1749 (Manipuri is in northwestern India); Burmese Civil War of 1740-1752; Burmese Civil War of 1753-1757; Burmese-Manipuri War of 1755-1758; Burmese-Manipuri War of 1764; Siamese-Burmese War of 1764-1769; Burmese-Manipuri War of 1770; Siamese-Burmese War of 1775-1776; Siamese-Burmese War of 1785-1792; Arakan Uprising, 1811-1815; Burmese Conquest of Assam, 1819; Burmese Invasion of Manipur, 1822; First Anglo-Burmese War, 1824-1826; Mon Uprising, 1838; Second Anglo-Burmese War, 1852; Third Anglo-Burmese War, 1885; Second World War, 1942-1945 (Japan against United States, United Kingdom, Netherlands, China, and allies); Burmese Guerilla War of 1948-present.



Convertibility

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

After British conquest, Burma became part of India monetarily. Second World War exchange controls were imposed starting in 1940. Burma left the sterling area 17 October 1966.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Two largest government-owned banks reported to have many nonperforming loans 1996-?.

Frankel and Rose (1996) list of currency crashes: 1975.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Bányai (1974), Donnison (1956), Fujita (2003), Robinson and Shaw (1980), Tun Wai (1962).

Monetary authorities: Burma

Dates Type Name Legal basis Remarks
2 December 1861

-31 December 1861

free banking (as part of currency union) one bank India, charter of the Bank of Bengal, 2 January 1809 The first coins were issued by 800. Burma had been part of India since 1825. The first bank was the Bank of Bengal (headquarters Calcutta, India), in Rangoon, on 2 December 1861. It was the only note-issuing bank in present-day Burma before the government of India monopolized note issue.
1 January 1862

-31 March 1935

government issue (as part of currency union) government of India (headquarters New Delhi, India) India, Paper Currency Act, No. 19, 18 July 1861 Indian government notes redeemable only in Rangoon began to be issued in August 1883 (by India, Act No. 20 of 1882). The second bank was apparently the National Bank of India (headquarters London, England), which established a branch in Rangoon in 1886. Burmese-issued coins were demonetized on 1 April 1892.
1 April 1935

-31 April 1937

central bank (as part of currency union) Reserve Bank of India (headquarters Bombay [now Mumbai], India) India, Reserve Bank of India Act, 6 March 1934 India replaced government issue with a central bank, which also had sole authority to issue notes in Burma. During this period the actual notes in circulation continued to be old Indian government notes, though they now became a liability of the central bank.
1 April 1937

-14 March 1942

central bank (special issue of notes) (as part of currency union) Reserve Bank of India (headquarters Bombay [now Mumbai], India) India, Reserve Bank of India Act, 6 March 1934; United Kingdom, India and Burma (Burma Monetary Arrangements) Order, 18 March 1937 The Rangoon branch of the Reserve Bank of India had a separate note issue for Burma. Indian notes higher than one rupee ceased to be legal tender in Burma on 1 April 1942 (Burma, Notification No. 18, 29 October 1941). This was a wartime measure.
15 March 1942

-August 1944

occupation currency Japanese (military) government (headquarters Tokyo, Japan) possibly a regulation of the Japanese military administration in Burma, 15 March 1942 The Japanese issued an occupation currency after their conquest of Burma during Second World War, which became complete on 8 May 1942.
August 1944

-30 April 1945

occupation currency (issued by joint central bank) Nampo Kaihatsu Kinko (Southern Development Bank) (headquarters Tokyo, Japan) Japan, law of 20 February 1942 establishing Southern Development Bank; Japan, decree? of 26 March 1943 allowing bank to issue notes; regulation of Japanese military administration in Burma?, August 1944 The Southern Development Bank was the Japanese occupation central bank for present-day Brunei, Burma, Indonesia, Malaysia, Philippines, and Singapore. The transfer of liability for notes to the Southern Development Bank occurred in August 1944, but was made retroactive to 1 April 1943. An abortive Central Bank of Burma of the Japanese puppet regime, established at Rangoon on 15 January 1944, printed some notes but issued few or none.
1 May 1945

-30 January 1946

occupation currency British Military Administration (headquarters Calcutta, India / Rangoon, Burma [now Yangon, Myanmar] from June 1945) (United Kingdom) Supreme Allied Commander of South East Asia Command, proclamation of 1 May 1945; India, Governor-General, Reserve Bank of India (Temporary Amendment) Ordinance, 9 June 1945 The British issued a temporary military currency upon retaking Burma during the Second World War. They did not reintroduce Indian currency because Burma was still a front-line area until the end of the war.
31 January 1946

-30 March 1947

government issue government of Burma (headquarters Rangoon, Burma [now Yangon, Myanmar]) Burma, Currency Notes Act, No. 25, January 1946 A Burmese government issue replaced British military currency.
31 March 1947

-30 June 1952

currency board Burma Currency Board (headquarters London, England) Burma, Currency and Coinage Act, 1946 Established a currency board in anticipation of India and Burma's impending independence. Of the initial issue of 632 million Burmese rupees, 100 million were unbacked to account for Reserve Bank of India notes looted by the Japanese when they invaded Burma in 1942. However, by 30 September 1948 the foreign reserves were 100% the currency board's monetary liabilities. Burma joined the IMF on 3 January 1952.
1 July 1952

-31 January 1970

central bank Union Bank of Burma from 1 July 1952 / People's Bank of [the Union of] Burma from 1 November 1969 / (headquarters for both Rangoon, Burma [now Yangon, Myanmar]) Burma, Union Bank of Burma Act, No. 9 of 1952; Ministry of Finance and Revenue, Notification No. 202, 3 June 1952 A central bank replaced the currency board to give the government greater latitude and more local control in monetary policy. Initially, the required total minimum ratio of foreign reserves was 25%, versus a former marginal reserve requirement of 100%. The Union Bank of Burma had begun as a commercial bank on 3 February 1948 (Burma, Union Bank of Burma Act, 1 October 1947). The government nationalized all banks on 23 February 1963.
1 February 1970

-June 1992

monobank People's Bank of [the Union of] Burma from 1 November 1969 / Union of Burma Bank from 30 September 1972 / Central Bank of Burma from [date unknown] / Central Bank of Myanmar from 1990 (headquarters for all Rangoon, Burma [later Yangon, Myanmar]) The People's Bank became the only bank in the country.
June 1992

-present

central bank Central Bank of Myanmar 1990 (headquarters for all Rangoon, Burma [Yangon, Myanmar]) Myanmar, Central Bank of Myanmar Law, July 1990; Financial Institutions Law, July 1990 Private banks were re-established as the country moved away from certain elements of central planning.



Exchange rate arrangements: Burma

Dates Arrangement Legal basis Remarks
1825?

-31 March 1937

fixed; used Indian rupee Burma became part of India in 1825.
1 April 1937

-14 March 1942

fixed (as part of currency union); 1 (Burmese) Indian rupee = 1 Indian rupee United Kingdom, India and Burma (Burma Monetary Arrangements) Order of 1937 Issued a separate currency equal to the Indian rupee. The Rangoon branch of the Reserve Bank of India had a separate note issue for Burma. India shared seigniorage of coin issuance with Burma from 1 August 1937 until Burma issued its own coins in 1949.
15 March 1942

-August 1944

hard peg; 1 Japanese military rupee (= 1 Japanese yen) = 1 (Burmese) Indian rupee Japanese military administration in Rangoon, regulation of 15 March 1943 When invading Burma during the Second World War, from about 31 January 1942, Japanese forces initially carried Japanese military dollars issued in Malaya. A decree of the Japanese military administration dated 1 May 1942 stated that Japanese military dollars would continue to be legal tender. By the same decree, the Japanese military rupee became a decimal currency. By the regulation of 15 March 1943, the Burmese rupee continued to be legal tender, as a Japanese tactic to win local support, but the rupee was inconvertible into pound sterling. Limited amounts of (Burmese) Indian rupees were apparently accepted by the Japanese at 4 (Burmese) Indian rupees = 1 Japanese military rupee. The prewar exchange rate had been about 1.3 Japanese yen = 1 (Burmese) Indian rupee. On 1 May 1942, the Japanese military commander-in-chief in Burma declared that Japanese military dollars for Malaya and Singapore would also be allowed to circulate in Burma.
August 1944

-30 April 1945

hard peg (as part of currency union); 1 Southern Development Bank rupee = 1 Japanese yen Japan, law of 20 February 1942 establishing Southern Development Bank; Japan, decree? of 26 March 1943 allowing bank to issue notes; regulation of Japanese military administration?, August 1944 The Southern Development Bank was the Japanese occupation central bank for southeast Asia. The transfer of liability for notes to the Southern Development Bank occurred in August 1944, but was made retroactive to 1 April 1943. The actual notes in circulation continued to be the old military notes.
1 May 1945

-30 January 1946

hard peg; 1 British Military Administration rupee = 1 Indian rupee = 1 prewar (Burmese) Indian rupee (United Kingdom) Supreme Allied Commander of South East Asia Command, proclamation of 1 May 1945 The British demonetized Japanese occupation currency on 1 May 1945. The market exchange rate had fallen to 100 Southern Development Bank rupees = 1 Indian rupee. No general exchange of Japanese rupees for military rupees was allowed. Officially, the British Military Administration rupee was only convertible into Indian rupees at the discretion of the military administration. The British military rupee, like the Indian rupee of the time, was not a decimal currency. British Military Administration notes were simply overprinted Reserve Bank of India notes.
31 January 1946

-31 March 1947

hard peg (as part of currency union); 1 Burmese rupee = 1 Indian rupee Burma, Currency Notes Act, No. 25, January 1946 Restore

d convertibility into the Indian rupee.

1 April 1947

-30 June 1952

fixed; 13-1/3 Burmese rupees = UK£1, or 1 Burmese rupee = UK 1 shilling 6 pence = 1 Indian rupee Burma, Currency and Coinage Act, 1946 When Burma established a currency board, the pound sterling became the anchor currency. Burma had already been linked to the pound sterling indirectly, because the pound sterling was the anchor currency of the Indian rupee.
1 July 1952

-17 November 1968

hard peg; 13-1/3 Burmese kyat = UK£1, or 1 Burmese kyat = 0.186621g gold, or 4.76 Burmese kyat = US$1 Union Bank of Burma, Notification No. 8, 1 July 1952 The decimalized Burmese kyat, now defined in terms of gold, replaced the Burmese rupee and a central bank replaced the currency board. Burma registered a gold parity with the IMF on 7 August 1953. The IMF lists the parity in terms of the US dollar as 4.7619 Burmese kyat = US$1, a small difference from how the central bank and I list it. The kyat was a traditional Burmese unit of weight equal to approximately 16.33 grams; the word was also used to refer to a flat piece of silver. A currency confiscation occurred in May 1964; 50- and 100-kyat notes, the largest in circulation, were allowed to be converted up to 500 kyat per person, subsequently reduced to 200 kyat. [I still need to find more details on this episode.]
18 November 1968

-22 August 1971

hard peg; 11.43 Burmese kyat = UK£1, or 4.7619 Burmese kyat = US$1, or 1 Burmese kyat = UK 1 shilling 9 pence = 0.186621g gold Did not follow the devaluation of the pound sterling on 18 November 1967.
23 August 1971

-26 December 1971

hard peg; 11.43 Burmese kyat = UK£1, or 1 Burmese kyat = 0.186621g gold (nominally) no action by Burma Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Burma ceased to maintain a peg to the US dollar.
27 December 1971

-6 February 1972

hard peg; 11.43 Burmese kyat = UK£1, or 5.3487 Burmese kyat = US$1, or 1 Burmese kyat = 0.186621g gold (nominally) Repegged to the the US dollar and adopted wider margins after the United States devalued the US dollar against gold on 18 December 1971. The pound sterling remained the intervention currency.
7 February 1972

-25 June 1972

hard peg; 1 Burmese kyat = approximately UK£0.71 pence = 0.186621g gold (nominally), or 5.3487 Burmese kyat = US$1 Devalued slightly against the pound sterling.
26 June 1972

-12 February 1973

hard peg; 5.3487 Burmese kyat = US$1, or 1 Burmese kyat = 0.186621g gold (nominally) Ceased quoting a pegged rate with the pound sterling after the United Kingdom floated the pound sterling on 23 June 1972.

RR: Freely falling from August 1972. Multiple rates, which are taxes on the purchase of foreign exchange.

13 February 1973

-24 January 1975

hard peg; 4.8138 Burmese kyat = US$1, or 1 Burmese kyat = 0.186621g gold (nominally) Did not follow the devaluation of the US dollar on 13 February 1973.

RR: Freely falling. Multiple rates, which are taxes on the purchase of foreign exchange.

25 January 1975

-1 May 1977

hard peg; 7.74289 Burmese kyat = 1 SDR, or 1 Burmese kyat = 0.186621g gold (nominally) Switched to the SDR as the anchor currency and devalued. The new rate initially implied a cross rate of 6.2391 Burmese kyat = US$1.

RR: Freely falling / moving band around US dollar / parallel market to February 1976. From March 1976, moving band of +/-5% around US dollar / parallel market.

2 May 1977

-31 March 1978

hard peg; 8.50847 Burmese kyat = 1 SDR, or 1 Burmese kyat = 0.186621g gold (nominally) Devalued against the SDR, but retained the former notional gold parity.

RR: Moving band of +/-5% around US dollar / parallel market.

1 April 1978

-February 1993

hard peg; 8.50847 Burmese kyat = 1 SDR International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members. A currency confiscation occurred in November 1985 as 50- and 100-kyat notes, the largest in circulation, were allowed to be converted immediately up to 5,000 kyat per person at 1-to-1. The excess had to be deposited in a bank. It was convertible at 2-to-1, later reduced to 4-to-1. A currency confiscation occurred on 5 September 1987 as the three largest denominations of notes (75, 35, and 25 kyat) were demonetized without compensation (Burma, State Council Ordinance No. 1, 5 September 1987).

RR: Moving band of +/-5% around US dollar / parallel market to April 1983. From May 1983-March 1986, managed float / parallel market, with parallel market premium 20-35%. From April 1986-march 1988, moving band around US dollar / parallel market. From April 1988-May 1991, freely falling / moving band of +/-5% around US dollar / parallel market, with parallel market premium doubling from 45% to 90%. From June 1991-December 1992, moving band of +/-5% around US dollar / parallel market. From January 1993, freely falling / moving band of +/-5% around US dollar / parallel market.

February 1993

-29 June 2001

hard peg, dual rate; official rate 8.50847 Burmese kyat = 1 SDR

(IMF does not list this as being a dual rate until 1996)

Introduced foreign exchange certificates, creating a second exchange rate in practice.

RR: Freely falling / moving band of +/-5% around US dollar / parallel market to January 1994. From February 1994-July 1996, freely falling / moving band around US dollar / dual market. From August 1996-January 1999, freely falling / de facto moving band around US dollar / dual market. Parallel market premium consistently above 100%, reaching 295% July 1997. From February 1999, dual market.

30 June 2001

-present

officially, hard peg, dual rate, official rate 8.50847 Burmese kyat = 1 SDR; in practice, managed float Liberalized the secondary market for foreign exchange. Most transactions occurred on the secondary market.



Cambodia



Political sketch

Also formerly known as the Khmer Republic and Kampuchea. Independent from France on 9 November 1953.

From the 800s to the 1400s Khmer kings ruled a military powerful state. From the 1400s onward, though, the Khmer were often involved in wars with Vietnam and Siam and under the domination of one or the other. In 1864 France established a protectorate as part of its conquest of Indochina. At the time the economy was based heavily on rice growing. On 26 September 1940, the Japanese occupied French Indochina, but left the Vichy French administration in place. In December 1940, Thailand tried to seize Cambodian and Laotian territory, but French-led forces resisted. In March 1941 Japan brokered a peace in which Cambodia and Laos ceded land to Thailand, which Thailand returned in 1947. In 1941 the French installed Prince Norodom Sihanouk on the throne. Japan deposed the French administration in Indochina on 9 March 1945. It declared the states of the region nominally independent but administered the region itself until the end of the Second World War in September 1945. On 8 November 1949 Cambodia became an autonomous state in the French Union, and on 9 November 1953 it became independent as a monarchy under Prince Sihanouk, who had suspended the constitution in a seizure of power in June 1952.

During the Vietnam War, Sihanouk tried to avoid making either side angry. He was overthrown in a coup of 18 March 1970 by military officers opposed to the presence of Vietnamese communists in the country. They abolished the monarchy on 9 October 1970. A U.S. bombing campaign along the border with Vietnam, which tried to disrupt North Vietnamese military supply routes, alienated much of the population and contributed to the growth of the communist Khmer Rouge movement. The Khmer Rouge came to power in early 1975. They set about trying to establish their model of a communist peasant state. They emptied the cities and murdered anybody who seemed educated or not poor. The country regressed economically and disease and starvation became widespread. The policies of the Khmer Rouge killed as many as 2 million of Cambodia's precommunist population of 7.3 million people. The Khmer Rouge's aggressive stance toward Vietnam prompted it to invade Cambodia and drive the Khmer Rouge into the western borderlands in December 1978 and January 1979. The Vietnamese established a client Cambodian government composed largely of defectors from the Khmer Rouge. Fighting continued between the government, the Khmer Rouge, and Cambodian royalist and anticommunist factions. Most of the factions signed a peace accord in 1991, and an interim government supervised by the United Nations held free elections in May 1993. Sihanouk returned soon afterward returned as the country's monarch, heading a coalition government opposed only by the Khmer Rouge. The Khmer Rouge leader Pol Pot died on 15 April 1998. At present (2004) Cambodia is an only partly democratic country. Years of conflict disrupted its economy. Agriculture, clothing manufacture, and tourism are important industries.



Wars since 1500

Siamese-Cambodian War of 1587; Siamese-Cambodian War of 1593-1594; Siamese-Burmese War of 1593-1600; Siamese-Cambodian War of 1603; Siamese-Cambodian War of 1622; Siamese-Cambodian War of 1714-1717; Vietnamese-Cambodian War of 1738-1750; Cambodian Rebellion of 1811-1812 (involving Siam and Vietnam supporting rival claimants to Cambodian throne); Siamese-Cambodian War of 1831-1834; Siamese-Vietnamese War, 1841-1845; French Indochina War of 1858-1863; French Indochina War of 1882-1883; Japanese Occupation of Indochina, 1940-1945; French-Siamese War, 1940-1941; Second World War in the Pacific (Japan against United States, United Kingdom, Netherlands, China, and allies), 1941-1945; French Indochina War of 1946-1954; Vietnam War, 1956-1975 (France against North Vietnam, later United States and South Vietnam against North Vietnam); Cambodian Civil War of 1970-1975; Mayaguez Incident, 1975 (Cambodia against United States); Cambodian (Kampuchean)-Thai Border War, 1977-1995; Cambodian (Kampuchean) Civil War of 1978-1998.



Convertibility

Indochina prohibited imports of Mexican silver dollars (also known as pesos or piasters) a governor-general's decree of 3 June 1903. As a result of foreign demand for silver during the Russo-Japanese War, the export of Indochinese piastres was forbidden on 3 January 1905 by a decree of that date by the governor-general. A decree of 1 January 1917 forbade the sale of Indochinese coins at prices exceeding their nominal legal value. This occurred during a run-up in the price of silver against gold that peaked in 1920. The decree of 3 January 1905 was repealed by a decree of the governor-general of Indochina of 30 December 1919.

When the First World War began, France imposed a moratorium of payments on all negotiable instruments starting 1 August 1914. The moratorium was subsequently extended by decrees until 1 March 1915. The central bank, the Bank of France, abandoned the gold standard on 5 August 1914, although no official prohibition on exporting gold existed until by a decree of 3 July 1915, affirmed by a law of 15 November 1915. A decree of 2 April 1918 prohibited capital exports without authorization. A law of 25 June 1928 officially restored the gold standard and repealed exchange controls. When the French franc was an object of currency speculation , a law of 13 August 1936 imposed extensive exchange controls, supplementing some lesser measures that had been implemented in 1935.

France imposed exchange controls on 9 September 1939 by a decree of that date, after the Second World War broke out in Europe. The controls were promulgated in Indochina by a decree-law of 27 September 1939. On 20 May 1940 capital controls within the franc zone were greatly relaxed by a French decree of that date. Exchanges of mail between French Indochina and France were cut off after Japan started the Second World War in the Pacific in December 1941, although telegraph communications continued until November 1942. Communications resumed in August 1945, following Japan's surrender to end the war. Exchange controls within the franc zone were not removed until 6 June 1946. Afterwards, the CFA franc became convertible both for current- and capital-account transactions within the French franc zone (France, Monaco, French possessions, and countries using the CFA franc). Outside the French franc zone it became convertible for current-account transactions when France resumed current-account convertibility, but it was not convertible for capital-account transactions. France had multiple exchange rates from 26 January 1948 until 17 October 1948, and a dual exchange rate from 18 October 1948 to 29 September 1949. On 20 September 1949 it devalued the French franc and unified the exchange rate, taking advantage of the lead offered by the United Kingdom, which had devalued the pound sterling on 18 September 1949. Under French rule, Indochina (present-day Cambodia, Laos, and Vietnam) comprised a unified currency zone. When the countries of the region established national currencies, issued by national central banks, the unified currency zone broke apart. Except in North Vietnam, which rejected continued economic ties with France after independence, some special exchange control arrangements with France persisted for a time afterwards.

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Apparently none in the conventional sense, but the Khmer Rouge in 1975 ended conventional banking when they forced a barter economy on the country.

Frankel and Rose (1996) list of currency crashes: Cambodia not included.

No exchange rate data in Reinhart and Rogoff (2002).

In October 1940, shortly after Japanese forces had invaded French Indochina, Japanese forces brought with them Japanese military yen. Only a small amount of Japanese military yen was ever used in French Indochina, though; instead, the Japanese used local currency (Fujita 2003: 8).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Gang (1993 [1985]), Meuleau (1990), Vickery (1986).

Monetary authorities: Cambodia

Dates Type Name Legal basis Remarks
22 February 1891

-31 December 1951

private monopoly issue Banque de l'Indochine (headquarters Paris, France) France, decree of 21 January 1875 chartering Banque de l'Indochine The Banque de l'Indochine established a branch in Phnom Penh. The bank became the note-issuing bank for all French colonies in Asia and the Pacific. In 1931, during a period of leftist government, the French state gave itself a 20% share in the bank (France, law of 31 March 1931). The second bank was perhaps the Banque Franco-Chinoise (headquarters Paris, France), in Phnom Penh, before 1953. The first coins were issued in the 1500s.
1 January 1952

-31 December 1954

joint monetary institute Institut d'Émission des États du Cambodge, du Laos et du Viêt-Nam (headquarters Phnom Penh, Cambodia) Accord de la Conférence inter-États, Pau, France, 29 November 1950, formalized as Convention [inter-États] sur l'Institut d'Émission, 23 December 1950; Conférence économique inter-États, Convention de Paris, 16 December 1951; France, Laws No. 48-1482 and 48-1483, both 25 September 1948; France, Decree No. 51-1477, 28 December 1951 The Indochinese states, which by this time were on the road to independence, nationalized the note issue. They did so both because they desired it and because it agreed with French government policy from 1930s onward to nationalize note issue in French colonies. The monetary institute was required to hold a minimum reserve of 50% in foreign exchange. It had separate note designs for Cambodia, Laos, and Vietnam.
1 January 1955

-May? 1975

central bank [Khmer name unknown to me] or Banque Nationale du Cambodge (National Bank of Cambodia) (headquarters Phnom Penh, Cambodia) Four-Party Agreement of Paris, 29 December 1954; Cambodia, Krâm No. 922-NS, 23 December 1954; statutes of Banque Nationale du Cambodge, Kret No. 744-NS, 31 December 1954 Separate central banks in Cambodia, Laos, and Vietnam replaced the joint monetary institute as the newly independent countries distanced themselves from the French colonial era. The central banks began active operations in May 1955. Cambodia's central bank issued notes to completely replace old Indochinese notes 29 September 1955. It also took over issuance of coins from the government. Cambodia joined the IMF on 31 December 1969.
May? 1975

-January 1978

"moneyless" economy government of the Khmer Republic (headquarters Phnom Penh, Khmer Republic [Cambodia]) Khmer Republic, decision of Khmer Rouge government, April 1975 The Khmer Rouge attempted to implement the Marxist vision of a moneyless society. The government did issue some coupons, however.
January 1978

-31 March 1980

dollarization used Vietnamese, Thai, and other foreign currency A Vietnamese invasion overthrew the Khmer Rouge and brought back a monetary economy.
1 April 1980

-present

central bank [Khmer name unknown to me] (People's Bank of Cambodia) / [Khmer name unknown to me] (People's National Bank of Cambodia) from 8 February 1982 / [Khmer name unknown to me] (National Bank of Cambodia) from 22 June? 1992 (headquarters for all Phnom Penh, Cambodia) People's Republic of Kampuchea, some sort of decision of 1979; Cambodia,

Law on the Renaming, Reorganization and Functioning of the People's National Bank of Cambodia, 31 January 1992

The country re-established a national currency and a central bank.



Exchange rate arrangements: Cambodia

Dates Arrangement Legal basis Remarks
1864

-1885

fixed; used Mexican, Spanish, and other silver dollars (piasters, pesos), with 1 Mexican silver piastre = 5.37 French francs French expeditionary force, commander-in chief's decision of 5 March 1863 Cambodia became a French protectorate in 1864. Apparently the French franc was legal tender alongside the Mexican silver piastre, though it seems to have been little used in practice. Cambodia issued local, franc-based coins worth a silver piastre. The coins are dated 1860 for the first year the king under whom they were struck came to power, but they did not actually enter circulation until the late 1870s or early 1880s.
1885

-7 July 1895

hard peg (as part of currency union); 1 Indochinese piastre de commerce = 24.4935g silver = Mexican $1 (piaster) France, Ministre de la Marine et des Colonies, decision of 24 December 1878; French Indochina, governor-general's arrêté of 22 December 1885 France minted the decimalized piastre de commerce, equal to the Mexican silver peso (dollar, piaster) and the U.S. trade dollar. Test strikes of the piastre de commerce were made as early as 1879, but the first strikes intended for widespread circulation did not occur until 1884. The arrêté of 1885 made the piastre de commerce legal tender in French Indochina.
8 July 1895

-26 March 1920

hard peg (as part of currency union); 1 Indochinese piastre = 24.3g silver French Indochina, governor-general's decree of 8 July 1895 France reduced the silver content of the piastre slightly to discourage the export of piastre coins. Henceforth the coin was called simply the piastre, not the piastre de commerce. Importation of Mexican piasters was forbidden by French Indochina, governor-general's decree of 3 June 1903. In terms of the French franc, the Indochinese piastre reached its most depreciated level on 26 February 1902, 1.925 French francs.
27 March 1920

-29 December 1921

soft peg to French franc (as part of currency union) French Indochina, governor-general's agreement with the Banque de l'Indochine, 20 January 1920 As a result of the increase in the price of silver relative to gold, convertibility into silver was suspended. The Indochinese piastre was pegged to the French franc with periodic adjustments. I have not found the precise dates of the adjustments, but monthly rates of Indochinese piastres per French francs, as listed in the Annuaire Économique de l'Indochine, are as follows: March 1920: 14.48; April: 15.35; May: 12.64; June: 9.10; July: 8.85; August: 10.47; September: 10.83; October: 10.18; November: 10.33; December: 8.72; January 1921: 8.15; February: 6.68; March: 6.30; April: 6.80; May: 5.84; June: 5.94; July: 6.39; August: 6.46; September: 7.29; October: 7.90; November: 7.18.
30 December 1921

-30 May 1930

hard peg (as part of currency union); 1 Indochinese piastre = 24.3g silver Resumed convertibility into silver after the price of silver relative to gold fell. In terms of the French franc, the Indochinese piastre reached its most appreciated level in 1926, 27 French francs. On 9 January 1930 the governor-general of French Indochina asked the Banque de l'Indochine to maintain an exchange rate of 1 Indochinese piastre = 10 French francs. The bank did so beginning the next day.
31 May 1930

-1 October 1936

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs = 0.5895g gold France, decree of 31 May 1930 Switched to the French franc at the anchor currency, at approximately the prevailing cross rate with silver. The idea was to avoid further large fluctuations in exchange rate with the French franc, which at the time was on the gold standard.
2 October 1936

-January 1943

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs France, decree of 2 October 1936 Indochina severed its pegged exchange rate to gold when the French franc abandoned the gold standard on 2 October 1936.
January 1943

-late September 1945

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs (nominally), or 0.976 Indochinese piastre = 1 Japanese yen Japan and French Indochina, treaty of 6 May 1941? The French colonial government in Indochina was under Vichy control and nominally allied with Japan during the Second World War in the Pacific. The exchange rate with the Japanese yen was used in trade with Japan. Convertibility was limited. The prewar exchange rate with the Japanese yen had been about the same.
late September 1945

-25 December 1945

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs (nominally) Apparently Indochina returned to the prewar exchange rate with the French franc after the Japanese occupation ended, but during this period it seems that trade at the official rate was thin. A currency confiscation occurred on 17 November 1945 (French Indochina, High Commissioner's arrêté of 17 November 1945). To reduce inflation and deny notes to the Viet Minh rebels in northern Vietnam, 500-piastre notes issued under Japanese occupation (9 March-23 September 1945) were demonetized, most without compensation. Other notes had to be deposited and were blocked until 20 September 1946.
26 December 1945

-10 May 1953

hard peg (as part of currency union); 1 Indochinese piastre = 17 French francs Indochina, High Commissioner's federal ordinance of 25 December 1945; France, Decree No. 45-0135, 25 December 1945 France revalued the Indochinese piastre along with other French colonial currencies after the Second World War, reflecting a judgement that the colonies had come out of the war in relatively better condition than France. In the case of Indochina, though, the judgement was not warranted.
11 May 1953

-31 December 1954

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs France, Decree No. 53-399, 11 May 1953 France devalued the Indochinese piastre to prewar parity to reduce budget deficits and counteract the fall in prices of key agricultural exports.
1 January 1955

-25 March 1956

hard peg (as part of currency union); 1 Cambodian riel = 10 French francs Cambodia, Krâm No. 922/NS, 23 December 1954; statutes of Banque Nationale du Cambodge, Kret No. 744/NS, 31 December 1954 Cambodia introduced a national currency to replace the multinational piastre, at 1 Cambodian riel = 1 Indochinese piastre. The riel was a decimal currency. The word "riel" perhaps comes from the Spanish "real" coin, also known as the Spanish silver dollar, piastre, peso, or piece of eight.
26 March 1956

-31 December 1959

hard peg; 1 Cambodian riel = 10 French francs (effective rate) = 0.0253905g gold, or 35 Cambodian riels = US$1 Cambodia, Decree No. 84-NS, 26 March 1956 Cambodia defined the riel in terms of gold. The official exchange rate with the French franc was 7.08 Cambodian riels = 1 French franc, but no transactions actually occurred at that rate.
1 January 1960

-14 October 1960

hard peg; 10 Cambodian riels = 1 new French franc (effective rate), or 35 Cambodian riels = US$1, or 1 Cambodian riel = 0.0253905g gold consequence of France, Ordonnance No. 58-1341, 27 December 1958; Ministry of Finance and Economic Affairs, Circulaire du 19 novembre 1959 relative au nouveau franc, 19 November 1959; Decree No. 59-1450, 22 December 1959 France redenominated the French franc on 1 January 1960 at 1 new French franc = 100 old French francs.
15 October 1960

-31 December 1964

hard peg, dual rate; official rate 10 Cambodian riels = 1 new French franc (effective rate), or 35 Cambodian riels = US$1, or 1 Cambodian riel = 0.0253905g gold Introduced an exchange rate for tourists of 12 Cambodian riels = 1 new French franc or 60 Cambodian riels = US$1.
1 January 1965

-28 February 1965

hard peg; 10 Cambodian riels = 1 French franc (effective rate), or 35 Cambodian riels = US$1, or 1 Cambodian riel = 0.0253905g gold Cambodia, Office National des Changes, Avis No. 74, 11 February 1965 Abolished the tourist rate. The notice ratified the change after the fact.
1 March 1965

-17 August 1968

hard peg, dual rate; official rate 10 Cambodian riels = 1 French franc (effective rate), or 35 Cambodian riels = US$1, or 1 Cambodian riel = 0.0253905g gold Re-established the tourist rate and made it more broadly applicable.
18 August 1968

-8 October 1970

hard peg; 10 Cambodian riels = 1 French franc (effective rate), or 55.54 Cambodian riels = US$1, or 1 Cambodian riel = 0.0253905g gold Unified the exchange rate. Cambodia never registered a gold parity with the IMF.
9 October 1970

-31 January 1971

hard peg; 10 Khmer riels = 1 French franc (effective rate), or 55.54 Khmer riels = US$1, or 1 Khmer riel = 0.0253905g gold Cambodia (Khmer Republic), Constitutional Law No. 442/70CE, 8 October 1970 The country changed its name from Cambodia to the Khmer Republic.
1 February 1971

-22 August 1971

hard peg, dual rate; official rate 10 Khmer riels = 1 new French franc (effective rate), or 55.54 Khmer riels = US$1, or 1 Khmer riel = 0.0253905g gold Khmer Republic, Office National des Changes, Avis No. 97, 23 January 1971 Allowed certain tourist businesses to retain some foreign exchange, effectively creating a dual exchange rate.
23 August 1971

-28 October 1971

hard peg, dual rate; official rate 10 Khmer riels = 1 new French franc (effective rate), or 55.54 Khmer riels = US$1, or 1 Khmer riel = 0.0253905g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Cambodia did not have a gold parity registered with the IMF, but it did have one in national law.
29 October 1971

-14 December 1971

hard peg; 140 Khmer riels = US$1 Khmer Republic, Office National des Changes, Avis No. 98 and 99, both 28 October 1971 Devalued and unified the exchange rate. It is unclear what happened to the gold parity, but even if it remained on the books, it was no longer effective.
15 December 1971

-16 January 1972

hard peg; 130 Khmer riels = US$1 Revalued close to the time of devaluation of the US dollar on 18 December 1971.
17 January 1972

-1 March 1972

soft peg, dual rate; official rate 120 Khmer riels = US$1 Introduced a preferential rate, initially 90 Khmer riels = US$1, for imports of foreign aid. From here on the exchange rate was changed more often.
2 March 1972

-November 1972

soft peg, dual rate; official rate 130 Khmer riels = US$1 Devalued the official rate slightly. The IMF source is sketchy about the years 1972-1973. The central bank suspended sales of foreign exchange for imports on 27 June 1972 and resumed them on 17 July 1972.
November 1972

-April 1973

soft peg, multiple rates; official rate 187 Khmer riels = US$1 The official rate was termed the "basic exchange rate." Khmer Republic, Fundamental Decision No. 4/PRK, 14 July 1972, established a floating exchange rate in principle.
April 1973

-26 August 1973

soft peg, multiple rates; official rate 230 Khmer riels = US$1 Devalued.
27 August 1973

-17 October 1973

soft peg, multiple rates; official rate 250 Khmer riels = US$1 Devalued.
18 October 1973

-May? 1975

crawling peg to US dollar, multiple rates The basic exchange rate, initially 275 Khmer riels = US$1, depreciated to 302 Khmer riels = US$1 by the end of 1973. On 3 January 1974 the basic rate was devalued to 375 Khmer riels = US$1; it was further depreciated on later occasions not specified by the IMF source.
May? 1975

-January 1978

"moneyless" economy The Khmer Rouge emptied Phnom Penh of inhabitants in April 1975 and demonetized the economy, apparently in May 1975, to implement their vision of a centrally planned economy. The demonetization qualifies as a total currency confiscation.
January 1978

-31 March 1980

used Vietnamese, Thai, and other foreign currency A Vietnamese invasion overthrew the Khmer Rouge.
1 April 1980

-1984

Kampuchean riel, managed float The government introduced a new currency, initially at 1 Kampuchean riel = 1kg rice. Exchange rates for foreign currency were introduced soon afterwards; there were initially 1 Kampuchean riel = 3 Vietnamese dong or 4 Kampuchean riels = US$1, floating thereafter. Cambodia provided no information to the IMF from 1975-1991, so the information for that period here may have gaps.
1984

-January 1986

hard peg; 7 Kampuchean riels = US$1 Though not officially reported, this official rate surfaced in 1984.
January 1986

-September 1987

hard peg, dual rate; official rate 30 Kampuchean riels = US$1 Devalued and introduced a dual exchange rate.
September 1987

-16 October 1988

hard peg; 100 Kampuchean riels = US$1 Ended the dual exchange rate.
17 October 1988

-30 April 1989

managed float Floated, from an initial rate of 142.70 Kampuchean riels = US$1.
1 May 1989

-present

Cambodian riel, managed float (IMF: also dual rate; see Remarks) The name of country was changed from Kampuchea back to Cambodia. In 1992, when IMF data resume, the official exchange rate on 31 December was 2,000 Cambodian riels = US$1. An unofficial parallel market was not legal but was tolerated. The difference between the official rate and the parallel rate narrowed first to under 2%, then under 1% as of 1 September 1994, though occasionally this limit was exceeded. The IMF classifies Cambodia as having a dual exchange rate, but I do not. The US dollar also circulates freely.



China



Political sketch

Also currently known as the People's Republic of China.

China is home to the world's oldest continuous civilization and has long been its most populous country. A summary such as this must necessarily omit even many of the highlights of its relevant history. It is important to keep in mind that among the omissions are many of the conflicts among regional warlords, or between warlords and the central government, that occurred periodically until 1949.

The portion of Chinese history relevant to modern monetary systems began during the Sung dynasty, which arose in 960 after a period of disorder. South of the Yangtze River, the Southern Sung dynasty lasted until 1279, when Mongol (Yüan) domination began. The Mongols ruled a huge empire that stretched from the Yellow Sea to Central Asia and beyond, but they were never able to achieve a durable identification with Chinese civilian institutions. They were overthrown in 1368 by the Ming dynasty, which attempted to close off trade and travel to the rest of the world. Up through the Ming dynasty China had a strong claim to be regarded as the world's most advanced civilization, but its deliberate isolation prevented it from absorbing the scientific and technological developments beginning to stir in Europe. In 1644 the Juchen tribes of Manchuria conquered the country and began the Ch'ing, or Manchu, dynasty. In the 1800s the Manchus lost several wars with technologically superior Western powers and with Japan. Those countries established enclaves in major ports where their laws rather than Chinese laws applied, and divided China into spheres of commercial and political influence. The "treaty ports" became centers of a nascent industrial revolution. Besides foreign wars, from 1851-1864 China experienced a civil war, the Taiping Rebellion, which cost as many as 20 million lives.

Resentment at the ineffectiveness of the Ch'ing dynast in resisting foreign military intimidation led to its downfall in 1911. A republic was proclaimed in 1912 under Sun Yat-sen, but soon regional warlords disputed the power of the central government. Sun's successor as leader of the National Party, general Chiang Kai-shek largely unified the country in the 1920, with the support of Chinese communists. When Sun broke with the communists they withdrew to the countryside and organized resistance there. Japan had annexed the Ryukyu Islands in 1879 despite Chin's protests, and it had gained Taiwan in 1895 after a war with China. Japanese forces invaded Manchuria in 1931, northern China proper in July 1937, and the treaty ports on 8 December 1941, at the start of the Second World War in the Pacific. (This was the end of foreign extraterritoriality in the treaty ports.) The brutal Japanese occupation of most of northern and eastern China lasted until the end of the Second World War in 1945. The Communists and Nationalists to some extent put aside their differences to fight the Japanese, with support from the United States and the United Kingdom, via India. The defeat of the Japanese resulted in their total withdrawal from China. After the world war the Communists, led by Mao Zedong, fought the Nationalists in a civil war from 1946 to 1949. The Communists triumphed, and proclaimed the People's Republic of China on 1 October 1949. Chiang Kai-shek retreated to Taiwan and established an independent state there.

The Communists nationalized land and industry. Under the dictatorship of Mao Zedong (older English spelling Mao Tse Tung), a centrally planned economy and political repression caused perhaps 40 million deaths. The Communists made large-scale executions of alleged class enemies and established a network of concentration camps that held millions of people. The Great Leap Forward (1958-1960), a muddleheaded attempt at economic modernization, caused a famine that took an estimated 30 million lives. The Cultural Revolution (1966-1976), which tried to revive revolutionary fervor, resulted in violence close to civil war in some parts of the country and greatly weakened the continuity of Chinese culture. Mao died on 9 September 1976. His successor, Deng Xiaoping, undertook economic reforms that reintroduced a measure of de facto private ownership of farmland and permitted some measure of private enterprise. The successors of Deng Xiaoping have continued economic reforms, making China a mixed economy whose dynamism comes from private enterprises and enterprises owned by provincial or local governments, many of which are in effect partly private. China has boomed, becoming a manufacturing powerhouse. In only a generation, hundreds of millions of its people have moved from grinding poverty largely unchanged for millennia to modest but modern standards of living. The Communist Party continues to exercise a dictatorship, but political repression is far less extensive than under Mao and Chinese now (as of 2004) have more effective freedom than at any time since least the 1930s. In 1997 Hong Kong, ceded to the United Kingdom by the Treaty of Nanking in 1842, was returned to Chinese rule.

Under Mao Zedong, China invaded Tibet in 1950-1951 and has occupied it ever since, murdering dissenters, destroying Tibetan cultural traditions, and peopling the region with Han Chinese, the dominant ethnic group in China.



Wars since 1000

Chinese War with the Khitans, 979-1004; First Chinese War with the Tanguts, 990-1003; Second Chinese War with the Tanguts, 1040-1043; Chinese-Annamese War of 1057-1061; Chinese-Annamese War of 1075-1079; Jungchen Mongol Invasion of Liao, 1114-1122; Jungchen Mongol Invasion of the Sung Empire, 1125-1162; Conquests of Genghis Khan, 1190-1227; Genghis Khan's First War with the Hsia Empire, 1206-1209; Mongol Conquests, 1206-1405; Genghis Khan's War with the Chin Empire, 1211-1215; Genghis Khan's Sack of Peking, 1215; First Mongol-Persian War, 1218-1221; Mongol Invasions of India, 1221-1398; Genghis Khan's Second War with the Hsia Empire, 1226-1229; Second Mongol-Persian War, 1230-1243; Mongol Conquest of the Chin Empire, 1231-1234; Mongol Invasions of Korea, 1231-1241; Mongol Conquest of the Sung Empire, 1234-1279; Vietnamese-Mongol War of 1257-1288; Mongol Civil War of 1260-1264; First Mongol Invasion of Japan, 1274; Mongol-Burmese War of 1277-1287; Second Mongol Invasion of Japan, 1281; Mongol-Burmese War of 1299-1300; Mongol-Chinese War of 1356-1368; Chinese Civil War of 1398-1402; Vietnamese-Chinese War of 1405-1407; Vietnamese-Chinese War of 1418-1428; Burmese-Chinese War of 1438-1446; Manchu Conquest of China, 1618-1650; Chinese Civil War of 1621-1644; Manchu Conquest of Korea, 1627; Chinese War with Koxinga, 1646-1662 (Koxinga was a pirate); Burmese-Chinese War of 1658-1661; Revolt of the Three Feudatories, 1674-1681; Javanese-Chinese-Dutch War, 1740-1743; Sino-Tibetan War of 1750-1751; Mongol Revolts of 1755-1760; Burmese-Chinese War of 1765-1769; White Lotus Rebellion, 1796-1804; First Opium War, 1839-1842 (against United Kingdom); Taiping Rebellion, 1850-1864; Nien Rebellion, 1850-1868; Panthay Uprising, 1855-1861 (by Muslims in Yunnan province) Second Opium War, 1856-1860 (principally against United Kingdom, to a lesser extent France, Germany, Russia, Japan, United States); Ili Provincial Rebellion, 1864; Chinese Revolts of 1865-1881; Muslim Rebellion in China, 1863-1877; Tientsin Massacre, 1870; Sino-French War of 1883-1885; Sino-Japanese War of 1894-1895; Boxer Uprising, 1899-1901; British Expedition in Tibet, 1903; Chinese Revolution of 1911-1912; Mongolian Secession, 1911; Sun Yat-Sen's Rebellion, 1913; Anti-Imperial Revolt, 1915-1916 (against the president's attempt to convert himself into an emperor); Chinese Reoccupation of Mongolia, 1919; Mongolian War of Independence, 1920-1921 (against China and Russian White Guard); Northern Expedition, 1926-1928 (by the Nationalist government against regional warlords and Chinese Communists); Soviet Invasion of Manchuria, 1929; Chinese Civil War of 1930-1934; Japanese Invasion of Manchuria, 1931; Japanese Invasion of Jehol Province, 1933; Long March (by Chinese Communists evading pursuit by Nationalist troops), 1934-1935; Sino-Japanese War of 1937-1945; Second World War in the Pacific, 1941-1945 (Japan against the United States, United Kingdom, Netherlands, Chinese, and allies); Chinese Civil War of 1945-1949; Chinese Invasion of Tibet, 1950-1951; Korean War, 1950-1953 (North Korea and China, supported by The Union of Soviet Socialist Republics, against the United States, South Korea, and allies); Tibetan Uprising of 1954; Sino-Burmese War, 1956; Sino-Indian Border Dispute, 1959-1962; Tibetan Uprising of 1959; Chinese Cultural Revolution, 1966-1969; Sino-Soviet Border Clashes, 1969; Laotian Guerilla War of 1977-1990; Sino-Vietnamese War of 1979; Tienanmen Square Massacre (of protestors favoring democracy), 1989.



Convertibility

China used a number of different monetary standards. Bank notes might be convertible into copper (used in coins for retail transactions, silver (used for wholesale and long-distance transactions within China), or gold (used for transactions with European countries and Japan from the late 1800s). Bank notes might also be inconvertible if the issuing bank was owned by some level of government, or if a local warlord had extracted its metallic reserves through threat of force.

A Chinese government order of about 12 May 1916 prohibited exchange for silver of the notes of two banks with substantial government ownership, the Bank of China and the Bank of Communications. Branches of the Bank of China in Shanghai and some other cities successfully resisted the order, which the Chinese prime minister revoked on 31 May 1916.

China imposed foreign-exchange controls on 14 March 1938. They have persisted ever since in one form or another. Effective 10 October 1948, the Nationalist government forbade private holdings of gold bullion, silver bullion, and foreign exchange, requiring that they be surrendered to the government. On 22 November 1948 the Financial Reform Bill of the same date by the Nationalist government made holding of gold, silver and foreign exchange legal again. However, the Nationalist government was rapidly losing control of mainland China to the Communists.

The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

Under communist rule the currency was long inconvertible. It became convertible for current-account transactions on 1 January 1994, when the exchange rate was unified. On 1 January 1998, during the East Asian currency crisis, China tightened its capital controls.



Other

Defaults on or restructurings of debt to the foreign private sector: 1921; 1939 (related to Sino-Japanese War); 1949 (by the Communist government, regarding the debts of the previous Nationalist regime).

Banking crises: The Chinese banking system until the communist takeover of China was so diverse and had such a long history that any list is necessarily incomplete. There were numerous local banking crises related to political events. National or important regional crises include run on the Imperial Bank of China branch in Shanghai, 6-7 February 1903; a national crisis in May 1916, especially with regard to the Bank of China and the Bank of Communications (in response to correct rumors that the government was considering merging these two banks, seizing their silver reserves, and using their notes as the basis for a national currency with a floating exchange rate); bank runs in north China in November 192l; a national crisis in April-May 1935; and nonperforming loans estimated at 50% of total loans of banking system at the end of 1998.

Frankel and Rose (1996) list of currency crashes: None.

On 23 March 1935, the Nationalist government undertook what came to be called the "banking coup." The minister of finance announced on that date steps that increased the government's share of ownership from 20% to 50% in one of the country's largest banks, the Bank of China, and from 20% to 66% in another, the Bank of Communications.

References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources:

China: Cheng (2003), Chou (1963), History of Chinese Currency (1983), Ji (2003), King (1987-1991), Liew and Xu (2004), Mao (1977), Peebles (1991), Peng (1994), von Glahn (1996), Wagel (1915), Yang (1952). Voluminous material exists in Chinese, which I do not read.

Japanese occupied territory: Bányai (1974), Central Bank of Manchou (1935), Fujita (2003), Yamanari (1936), Yasutomi (1998), Young (1965).

Tibet: Bertsch (1997).

Monetary authorities: China

Special remark: China's long monetary history is complex, and some parts remain murky. Because much material is available only in Chinese, which I do not read, I would particularly welcome comments from knowledgeable readers. Transliterations are in Pinyin where I could find them, otherwise in Wade-Giles.

Dates Type Name Legal basis Remarks
995

-1008?

free banking multiple banks Issued notes issued after an uprising caused a shortage of coins. The first coins were issued in the 500s BC.
1008?

-1023

private monopoly issue syndicate of sixteen merchants The government granted sixteen merchants a monopoly of issue after problems of reliability with earlier issuers.
1023

-mid 1110s

government issue Northern Sung dynasty (headquarters Kaifeng, China) It is not entirely clear whether private issue of notes ceased.
mid 1110s

-1160

free banking alongside government issue multiple banks alongside government notes issued by Northern Sung dynasty (headquarters Kaifeng, China) / Southern Sung dynasty (headquarters Hangchow, China) from 1127 Banks resumed issuing notes.
1160

-1180

government issue Southern Sung dynasty (headquarters Hangchow, China) The government monopolized the issuance of notes.
1180

-1203

free banking alongside government issue multiple banks alongside government notes issued by Southern Sung dynasty (headquarters Hangchow, China) There may have been other episodes of free banking ultimately suppressed by the government from the 1100s to the 1400s. Information on this period in English seems sketchy.
1203

-about 1500

government issue Southern Sung dynasty (headquarters Hangchow, China) / Yuan dynasty (headquarters Peking, China) from 1260 / Ming dynasty (headquarters Nanking, China / Peking, China from 1421) from 1368 Notes circulated little from 1465 onwards because inflation reduced their value and public acceptance of them.
about 1500

-1651

coins only The government ceased issuing notes, but some continued to circulate.
1651

-1661

government issue Ch'ing dynasty (headquarters Peking, China) The government ceased issuing notes when dynasty changed. Notes depreciated.
1661?

-1853

free banking multiple banks Free banking began sometime in the mid 1600s but may have been earlier or later than 1661.
1853

-September 1861

free banking alongside government issue multiple banks alongside government notes issued by Hu Pu (Board of Revenue) (headquarters Peking, China) The government briefly issued notes to pay for its expenses during the Tai-Ping rebellion.
September 1861

-September 1905

free banking multiple banks Government issue ceased. The privately owned but government-encouraged Imperial Bank of China (headquarters Shanghai, China), opened on 27 May 1897 in Shanghai. It was the first modern Chinese-owned bank and had some government granted privileges as well as receiving government deposits. It issued the first modern notes by a Chinese bank in 1899.
September 1905

-31 October 1928

free banking alongside government issue (more precisely, government banks) multiple banks The first government bank was the Da Qing Hubu Yinhang (Ta-Ching Government Bank) (headquarters Peking [Beijing], China). There were also issues of military notes from 1912 onward; most lasted only briefly. A government decree of 1910 gave the Ta-Ching Bank a monopoly of note issue and ordered other Chinese banks to withdraw their notes within five years, but the revolution of 1911 made these provisions moot. In 1914 China imposed a banknote tax of 1.25% per year and a requirement that notes be backed 100%, of which 60% had to be cash and 40% government securities (China, Banknotes Issuance Tax Law, August 1914). The law did not apply to foreign banks, whose branches in the treaty ports were protected by extraterritoriality.
1 November 1928

-3 November 1935

central bank alongside other issuers Zhongyang Yinhang (Central Bank of China) (headquarters Shanghai, China) alongside other issuers China, legislation creating Central Bank of China, 1928 The Central Bank of China was given a leading role, but eight other "modern" (Western-style) banks issued notes, as did native (old Chinese-style) banks, plus foreign banks in the treaty ports. Free banking continued in the treaty ports until 8 December 1941, when the Japanese invaded at the start of the Second World War in the Pacific. However, it was of little practical importance after the Japanese invasion of north China began in July 1937.
4 November 1935

-30 November 1952

central bank alongside other issuers (including occupation currency 1937-1945) Zhongyang Yinhang (Central Bank of China) (headquarters Shanghai, China / Hangchow, China from 1937 / Chungking, China from 1938) / Zhongguo Renmin Yinhang (People's Bank of China) (headquarters Peking, China) from 1 October 1949 China, Central Bank of China Act, 23 May 1935; China, Currency Reform Decree, 3 November 1935 The government took control of the Bank of China (Zhongguo Yinhang) (headquarters Peking [Beijing], China), Bank of Communications (Jiaotong Yinhang) (headquarters Peking [Beijing], China), and Farmers Bank (Zhongguo Nongmin Yinhang) (headquarters Hankow? [Hanzhou], China) at the start of the period. Banks other than the Bank of China, Bank of Communications, and Central Bank of China had their note issues frozen and were required to cease issuance by 1937. (In fact, though, the Farmers Bank continued to issue notes. Also, these regulations did not apply to foreign banks in the treaty ports, which had extraterritorial status.) The government-owned banks were under central direction, so their note issues did not compete. In early 1937 the government took control of the Kwangtung [Guangdong] Provincial Bank (Kuangtung Sheng Yinhang) (headquarters Canton [Guangzhou]), which had issued notes in that region. On 30 June 1942, the Central Bank of China became the only issuer in territory controlled by the Nationalist government. There were also Japanese occupation currencies described separately as well as multiple regional Communist issues. After the Japanese occupation, new banking laws in 1946 under the Nationalist government prohibited new private banks and limited the activities of foreign-owned banks. Under the Nationalist government, China joined the IMF on 27 December 1945, as an original member. After 1949, China's seat at the IMF was occupied by Taiwan; it was given to the mainland government on 17 April 1980. The People's Bank of China
1 December 1952

-September 1983

monobank Chungkuo Jenmin Yinhang (People's Bank of China) (headquarters Peking, China) a series of measures starting with People's Republic of China, Government Administrative Council decision on "Unification of National Economy and Finance," 3 March 1950 Established a monobank as part of central planning. The People's Bank of China had been established 1 December 1948 as a result of the consolidation of three communist note-issuing banks, the Huabei Bank, the Beihai Bank and the Xibei Peasant Bank.
September 1983

-present

central bank Chungkuo Jenmin Yinhang (People's Bank of China) (headquarters Peking, China) People's Republic of China, directive of State Council, September 1983; provisional banking regulations, 1986; Law on the People's Bank of China, 18 March 1995 Established a two-tier banking system as part of a move away from central planning. The 1995 law confirmed the decision.



Monetary authorities: Japanese-occupied territory, 1932-1945

Upon invading Manchuria in 1931, the Japanese initially used notes of the Bank of Chosen (headquarters Seoul, [now South] Korea), since Korea was a Japanese colony at the time. They quickly established a puppet government of Manchuria, which they called Manchukuo. The Central Bank of Manchou (or Manchukuo) (in Chinese, Manchou Chungyang Yinhang) began operations on 1 July 1932 (Manchukuo, law of 11 June 1932). Its headquarters was in Hsinking. Manchukuo, law of 26 October 1942, intended to separate the bank's central banking functions from its commercial banking business. The Kounou Kinko was established in August 1943 in order to take over the ordinary banking business of the Central Bank. The central bank remained in existence until August 1945, when Soviet troops invaded Manchuria.

Before the Japanese invasion, provincial banks in the provinces of Kirin and Heilungkiang had issued notes starting in 1914. The Central Bank of Manchou replaced these issues with its own when it opened.

Upon invading north China in July 1937, Japanese forces initially used Bank of Chosen notes, Bank of Manchukuo notes, and Bank of Japan notes. Later, the Japanese issued military currency (gunpyo) notes. Initially these were Bank of Japan notes overprinted so they would not be good for use in Japan, but in the spring of 1938 the military began issuing notes with a distinctive design. Later, the Japanese established various regional central banks, to take advantage of the longstanding history of regional issuers in China.

In August 1937 the Japanese invaded Chahar province, which borders Manchuria and Mongolia. The Chahar Commercial Bank was still issuing notes, although in accord with China's Currency Reform Decree of 3 November 1935 its notes issues were frozen. Bank officials fled with the bank's reserves before the Japanese could seize them. The Japanese therefore determined to issue their own currency through a puppet central bank to replace the currency of the Chahar Commercial Bank. They therefore established the Channan Bank (Ch'anan Yinhang) (headquarters Kalgan, Chahar province) on 27 September 1937. From 1-20 October 1937 it exchanged its notes for old notes at one-to-one. On 27 November 1937 the Channan Bank was reorganized and merged with two other banks to form the Bank of Inner Mongolia (Mengchiang Yinhang), for Chahar, Sui Yuan, and north Shanshi provinces. The headquarters of the new bank was in Kalgan. The bank began operations on 1 December 1937 and ceased in October? 1945, following Japan's surrender to end the Second World War.

For the remainder of north China, the Japanese established as a central bank the Federated Reserve Bank of China, later called the Federal Reserve Bank of China (Chungkuo Lienho Chunpei Yinhang) ([Japanese puppet] Provisional Government of China, law of 5 February 1938). Its headquarters was in Peking (Peiping). It began operations on 10 March 1938 and ceased in October? 1945, following Japan's surrender to end the Second World War. The Japanese withdrew Bank of Chosen, Bank of Manchuria, Bank of Japan, and Japanese military notes to promote use of the notes of the Federal Reserve Bank of China. Before the invasion, the Japanese were pushing the circulation of notes of the Hopei (Heibei) Provincial Bank (Hopei Sheng Yinhang), whose headquarters was in Tientsin (Tianjin). However, after their invasion, the bank's note circulation shrank to insignificance as the Japanese promoted use of notes of the Federal Reserve Bank of China. By a decree of March 1938, the Federal Reserve Bank of China permitted for one year the circulation of the notes of Nationalist Chinese banks, though the notes of certain other banks were prohibited from circulating after three months. Nationalist Chinese currency was called fapi. In March 1939 Federal Reserve Bank of China currency became the only legal tender and use of Nationalist Chinese currency was prohibited.

The most important city of central China, and the financial center of the whole country, was Shanghai, which Japanese forces conquered in late 1937. Japanese troops who made landings near the city to invade it on November 1937 apparently brought Japanese military yen with them. Japanese military yen circulated alongside locally issued notes of Chinese and to a lesser extent foreign banks. Somewhat later, the Japanese established the China Development Bank (Hua Hsing Shangyeh Yinhang) as a quasi central bank. Its headquarters were in Shanghai. It opened on 1 May 1939 (or perhaps 10 May; sources are contradictory) and issued notes until 18 February 1941. Its notes never achieved widespread acceptance. The Japanese established the Central Reserve Bank of China (Zhongyang Chuxu Yinhang) with headquarters in Nanking (Nanjing). It opened there on 6 January 1941, and in Shanghai on 20 January 1941 ([Japanese puppet] Republic of China, legislation of 19 December 1940). It took over note issuance and other central banking functions in Shanghai from the China Development Commercial Bank on 19 February 1941. Initially the Japanese allowed Nationalist currency to continue circulating in central China, but a decree of 7 June 1942 by the Finance Ministry of the Japanese puppet Republic of China announced that from 21 June 1942 in Shanghai and 30 June 1942 in the rest of the area where Central Reserve Bank of China notes circulated, only its notes would be legal tender, and Chinese Nationalist currency would be prohibited. The Central Reserve Bank of China ceased in October? 1945, following Japan's surrender to end the Second World War.

Japanese forces conquered much of south China in October 1938. The Japanese then took over the Kwangtung Provincial Bank (Kuangtung Sheng Yinhang), in Canton (Guangzhou). It had issued notes since 1931. Under Japanese occupation, it made an issue of notes in 1939 for Hainan Island and starting in 1940 issued notes for elsewhere in south China. In mid 1942, though, the Central Reserve Bank of China opened branches in Canton and other cities of south China and the notes of the Kwangtung Provincial Bank seem to have been frozen. An exchange of Central Reserve Bank of China notes for Chinese Nationalist notes was made starting 10 July 1942 in south China other than Hong Kong. There was also a final exchange period throughout the territory of the Central Reserve Bank of China from 2 November-1 December 1942. After 1 December 1942, Nationalist-issued currency was prohibited in Japanese-occupied central and south China.

There were also a number of other provincial banks that had not yet ceased issuing notes when the Japanese invaded, and the Japanese made some use of these, for instance the Fukien Provincial Bank (Fuchien Sheng Yinhang) in Foochow (Fuzhou). Compared to the issues of the main Japanese puppet central banks, though, their issues were insignificant (Young 1965: 365-6).

Because of the extraterritorial status of the treaty ports, use of Nationalist-issued currency continued to be legal in those areas, which included the most important financial districts in China. The use of Nationalist currency in the treaty ports was an important factor in helping it retain its value. It remained the preferred currency for use in foreign trade even though Japanese puppet currency became more and more widely used over time for domestic trade with the Japanese-controlled areas. Use of Nationalist currency ceased to be legal in the treaty ports when the Japanese overran them on 8 December 1941 to begin the Second World War in the Pacific.

Japanese troops also used Japanese military yen as official currency in various parts of China. They withdrew military yen in 1940 in Inner Mongolia and North China, where puppet central banks took over issuing currency. The exchange rate between the military yen and the replacement puppet currencies was one-to-one. In central and south China except Hong Kong, currency of the Central Reserve Bank of China replaced Japanese military yen on 1 April 1943 (Japanese military authorities in China, decision of 24 March 1943). Hong Kong had a special regime described in its country table. Hainan Island, which Japanese forces had invaded on 10 February 1939, also continued to use Japanese military yen after they had ceased to be issued on the mainland.



Monetary authorities: treaty ports

From 1844 to 1941, a number of foreign powers (France, Germany, Japan, United Kingdom, United States) operated enclaves in the so-called treaty ports that were under home-country rather than Chinese law. I use the term "treaty ports" to include all cities where enclaves existed. These tables do not deal with the treaty ports. The treaty ports generally had free banking, in which various foreign banks issued notes. After 1937, their notes had declining importance because of monetary reforms in China and Japan's invasion of north China. Free banking in the treaty ports ended after Japan invaded them on 8 December 1941 to start the Second World War in the Pacific.



Monetary authorities: Tibet

Dates Type Name Legal basis Remarks
13 January? 1913

- August 1959

government issue government of Tibet (headquarters Lhasa, Tibet) Used Chinese and Indian currency, mainly coin, before this. There seem to have been no modern-style banks before 1913, and perhaps not even before 1959.
August 1959

-present

central bank (as part of currency union) Chungkuo Jenmin Yinhang (People's Bank of China) (headquarters Peking, China) China introduced its currency after its forces invaded and occupied Tibet.



Exchange rate arrangements: China

Special remark: China's long monetary history is complex, and some parts remain murky. Because much material is available only in Chinese, which I do not read, I would particularly welcome comments from knowledgeable readers, most of all on the details of the years before 1890.

Dates Arrangement Legal basis Remarks
to 1890 see Remarks In very broad outline, the metallic basis of the system was copper until about the 1300s; then silver became dominant, but copper was still widely used in small payments. Government issues of paper money by various dynasties and provincial governments eventually depreciated substantially. Warlords issued local currencies at times. During times of trouble, paper money often had fixed or pegged exchange rates, if at all, into local rather than nationally accepted media of exchange. The first coins were issued in the 500s BC. Decimalization existed from the first century AD.
1890

-1905

fixed; 1 Chinese piaster = 26.955g silver The Canton (Guangzhou) mint made the first yuan, also known as the "dragon piaster," similar to (but with more silver than) the Mexican silver peso (piaster) widely used in East Asia. The mint in Pehtang (near Tianjin [Tientsin]) also minted a dragon piaster, containing 23.124g silver, less than the Mexican peso. Yuan is Chinese for "dollar" or (an older meaning) "circle."
1905

-24 May 1910

hard peg; 1 Chinese piaster = 26.955g silver Government banks began issuing currency.
25 May 1910

-9 March 1933

hard peg; 1 Chinese yuan = 24.494g silver China, decree of 1910 The yuan was decreed to be equal to 0.72 tael; the tael was a unit long used for weighing silver ingots used in trade, and was also a unit of account, especially in Shanghai, China's financial center. In the period from 1912 to 1949, there were also many regional currency issues, which waxed and waned with the fortunes of the warlords or groups issuing them; few proved durable.
10 March 1933

-3 November 1935

hard peg; 1 Chinese yuan = 23.4934g silver China, Ministry of Finance, decree on "the abolition of tael and adoption of silver dollars," 2 March 1933 Abolished the long-established sycee and tael as units of account and made the yuan the sole monetary unit. There were various taels and sycees in use in different parts of China. The Shanghai tael, the most widely used, was converted at 1 Chinese yuan = 0.715 Shanghai tael.
4 November 1935

-27 March 1938

hard peg; 1 Chinese yuan = UK 1 shilling 2.5 pence (14.5 pence), or approximately 16.55 Chinese yuan = UK£1 China, Currency Reform Decree, 3 November 1935 China abandoned the silver standard because the US silver purchase program of the mid 1930s was causing a marked appreciation of the Chinese yuan relative to gold-based currencies.

RR: Peg to pound sterling.

28 March 1938

-17 August 1941

managed float Foreign banks ceased the stabilization agreement by which they had agreed not to sell Chinese yuan for less than UK 14.5 pence. The yuan fell to UK 3.5 pence in August 1939 (240 pence = UK£1).

RR: Freely falling, dual market.

18 August 1941

-9 July 1942

hard peg; 1 Chinese yuan = UK 3.15625 pence, or approximately 70.85 Chinese yuan = UK£1, or 1 Chinese yuan = US$0.053125, or approximately 18.81 Chinese yuan = US$1 [Currency] Stabilization Board of China, announcement of 18 July 1941 The Stabilization Board pegged the value of the yuan.

RR: Freely falling, dual market.

10 July 1942

-June 1945

hard peg; 20 Chinese yuan = US$1 Switched to the US dollar as the anchor currency at a rate implying a devaluation from the old prevailing cross rate, which had been approximately 17.58 Chinese yuan = US$1.

RR: Freely falling, dual market.

June 1945

-7 March 1946

soft peg; 1,430 Chinese yuan = US$1 Devalued during the inflation of Second World War.

RR: Freely falling, dual market.

RR: Freely falling, dual market.

8 March 1946

-18 August 1946

soft peg; 2,020 Chinese yuan = US$1 Devalued during the inflation of Chinese civil war continuing after Second World War.

RR: Freely falling, dual market.

19 August 1946

-16 February 1947

soft peg; 3,350 Chinese yuan = US$1 Devalued.

RR: Freely falling, dual market.

17 February 1947

-16 August 1947

soft peg; 12,000 Chinese yuan = US$1 China, government announcement of 16 February 1947 Devalued and prohibited the purchase and sale of gold as well as the circulation of foreign currencies in China.

RR: Freely falling, dual market.

17 August 1947

-19 August 1948

soft peg, dual rate; official rate 12,000 Chinese yuan = US$1 Allowed an open market rate of 90,000 Chinese yuan = US$1 for most transactions. In January 1948 the official rate was essentially limited to government transactions. China introduced a system of foreign exchange certificates for foreign exchange received by exporters on 31 May 1948.

RR: Freely falling.

20 August 1948

-18 August 1948

soft peg, dual rate; official rate 20,000 Chinese yuan = US$1 Devalued. This was a period of hyperinflation, and the unofficial free market rate was 12 million Chinese yuan = US$1.

RR: Freely falling.

19 August 1948

-10 November 1948

hard peg; 1 (Nationalist) Chinese gold yuan = 0.2217g gold (nominally), or 4.05 (Nationalist) Chinese gold yuan = US$1 China, Financial and Economic Emergency Measures, presidential decree of 19 August 1948 Introduced the so-called gold yuan, not really convertible into gold, at 1 gold yuan = 3 million old yuan. The old yuan was also known as the yuan fapi, or fabi. It was also decreed that 2 gold yuan = silver $1 coin. On 24 February the Nationalist government began circulating silver dollar coins in Shanghai in an unsuccessful attempt to issue a stable currency. A hyperinflation occurred.

RR: Freely falling / freely floating, dual market.

11 November 1948

-27 May 1949

hard peg, multiple rates; 20 (Nationalist) Chinese gold yuan = US$1, or 1 (Nationalist) Chinese gold yuan = 0.0448942g gold (nominally) Devalued and introduced system of tradeable foreign exchange certificates. It seems that multiple exchange rates were in existence. Certainly they were in existence by February 1949, when the Nationalist government created a special rate of 2.5 (Nationalist) Chinese gold yuan = US$1 for collecting import duties.

RR: Freely falling / freely floating, dual market.

28 May 1949

-30 September 1949

(Nationalist) Chinese gold yuan, managed float, multiple rates, alongside (Communist) Chinese renminbi yuan, crawling peg; multiple rates As the Communists won the war against the Nationalists they introduced their own currency with exchange rates varying from province to province. The renminbi (Wade-Giles spelling jen min piao) yuan was created in 1948. At the start of this period the exchange rate was 1 Communist Chinese yuan (renminbi) = 100,000 Nationalist gold yuan. Exchange rates were changed month by month, starting with an initial official rate of 600 Communist Chinese yuan (renminbi) = US$1. By the time of the Communist victory, the market exchange rate was 425 million (Nationalist) Chinese gold yuan = US$1.

RR: Freely falling / freely floating.

1 October 1949

-January 1950

(Communist) Chinese yuan (renminbi), crawling peg, multiple rates (controlled) The Nationalists were defeated and the Communists proclaimed the People's Republic of China at the start of this period. Pick and Sédillot (1971: 204) date the period as starting slightly earlier, on September 21. By 1952 the renminbi, issued by the People's Bank of China, was the only currency in the country. Currencies issued by warlords, Nationalist government, Japanese, and regional Communist issuers had been eliminated.

RR: Freely falling / freely floating.

January 1950

-April 1950

crawling peg, multiple rates (controlled) official rate 21,000 Chinese yuan (renminbi) = US$1 Devalued.

RR: Freely falling.

April 1950

-January 1951

crawling peg, multiple rates (controlled); official rate 45,000 Chinese yuan (renminbi) = US$1 Devalued.

RR: Freely falling / freely floating.

January 1951

-September 1952

crawling peg, multiple rates (controlled); official rate 22,890 Chinese yuan (renminbi) = US$1 Revalued.

RR: Freely falling / freely floating to December 1951; managed float from January 1952.

September 1952

-7 December 1952

crawling peg, multiple rates (controlled); official rate 22,267 Chinese yuan (renminbi) = US$1 Revalued.

RR: Managed float.

8 December 1952

-28 February 1955

crawling peg, multiple rates (controlled); official rate 22,430 Chinese yuan (renminbi) = US$1 Devalued slightly.

RR: Managed float.

1 March 1955

-22 December 1971

crawling peg, multiple rates (controlled); official rate 2.46 new Chinese yuan (renminbi) = US$1 Introduced a new currency at 1 new Chinese yuan (renminbi) = 10,000 old yuan (renminbi). Conversion occurred from 1 March-30 April 1955. In June 1969, during the Cultural Revolution, China officially changed the name of the currency to renminbi, meaning people's currency. The yuan remained the unit of account.

RR: Managed float. Parallel market premium reached 348% in July 1958 and 763% in June 1962.

June 1969

-22 December 1971

crawling peg, multiple rates (controlled); official rate 2.46 Chinese yuan (renminbi) = US$1 In a typical propaganda move during the Cultural Revolution, the currency became officially known as the Renminbi, though the yuan remained the unit of account.

RR: Managed float.

23 December 1971

-19 February 1973

crawling peg, multiple rates (controlled); official rate 2.267 Chinese yuan (renminbi) = US$1 China, government announcement of 23 December 1971 China did not follow the devaluation of the US dollar on 18 December 1971. Rather, it announced that the value of its currency against the Hong Kong dollar and the pound sterling (the Hong Kong dollar's anchor currency) would remain unchanged, and that trade would be conducted in those currencies.

RR: Managed float.

20 February 1973

-18 August 1974

crawling peg, multiple rates (controlled); official rate 2.204 Chinese yuan (renminbi) = US$1 Did not follow the devaluation of the US dollar on 13 February 1973.

RR: De facto crawling band of +/-2% around US dollar from January 1974.

19 August 1974

-31 December 1984

basket, multiple rates (controlled) Pegged to a basket of 15 currencies whose precise composition was not disclosed. IMF coverage of mainland China begins in 1980. On 17 April 1980, China took the seat formerly occupied at the IMF by Taiwan. China introduced foreign exchange certificates for use by nonresidents on 1 April 1980.

RR: De facto crawling band +/-2% around US dollar to February 1981. Managed float, multiple rates from March 1981.

1 December 1985

-31 December 1985

basket, multiple rates (controlled) Partly unified the exchange rate and introduced the "swap rate." Until the swap rate was eliminated, there were multiple rates: the official rate, the swap rate, and the effective rates faced by exporters, which were combinations of the other two rates.

RR: Managed float, multiple rates.

1 January 1986

-4 July 1986

managed float, multiple rates (controlled) Greater flexibility.

RR: Multiple rates.

5 July 1986

-13 December 1989

officially, managed float, multiple rates; in practice, hard peg, 3.72 Chinese yuan = US$1 In practice the exchange rate hardened into a peg.

RR: Managed float, multiple rates.

14 December 1989

-16 November 1990

officially, managed float, multiple rates; in practice, hard peg, 4.72 Chinese yuan = US$1 Devalued.

RR: Managed float, multiple rates.

17 November 1990

-8 April 1991

officially, managed float, multiple rates; in practice, hard peg, 5.22 Chinese yuan = US$1 Devalued.

RR: Managed float, multiple rates.

9 April 1991

-31 December 1993

officially, managed float, multiple rates; in practice, crawling peg to US dollar, dual rate Made the exchange rate more flexible.

RR: Managed float, multiple rates to July 1992. De facto crawling band of +/-2% around US dollar from August 1992; parallel market premium peaked at 124% in June 1991.

1 January 1994

-present

officially, managed float initially; in practice, hard peg of 8.28 Chinese yuan = US$1 from May 1995 (IMF: managed float to 1998, reclassified as hard peg in 1998) Unified the official rate and the swap rate, in effect devaluing the currency. The initial exchange rate was 8.7 Chinese yuan = US$1.

RR: De facto peg to US dollar; parallel market premium in single digits.



Exchange rate arrangements: Japanese-occupied territory, 1932-1945



Upon invading Manchuria in 1931, the Japanese initially used notes of the Bank of Chosen (headquarters Seoul, [now South] Korea), since Korea was a Japanese colony at the time. They quickly established a puppet government of Manchuria, which they called Manchukuo. The Manchukuo yen came into existence on 1 July 1932 (Manchukuo, law of 11 June 1932). Initially its exchange rate was 1 Manchukuo yen = 23.91g silver. Manchukuo abandoned the silver standard on 1 December 1935, following China's move to do so nearly a month earlier. The Manchukuo yen was pegged to the Japanese yen at 1 Manchukuo yen = 1 Japanese yen. In February 1940, Manchukuo established exchange controls and surrendered its foreign exchange to Japan. The Manchukuo yen remained in existence until August 1945, when Soviet troops invaded Manchuria shortly before the end of the Second World War.

Before the Japanese invasion of Manchuria, provincial banks in the provinces of Kirin and Heilungkiang had since 1914 issued floating currencies denominated in a unit called the tial. The Central Bank of Manchou replaced these issues with its own issues when it opened, but I have found no information on the rate of exchange at which replacement occurred.

Upon invading north China in July 1937, Japanese forces initially used Bank of Chosen notes, Bank of Manchukuo notes, and Bank of Japan notes. Later, the Japanese issued military currency (gunpyo) notes. The Korean won, Manchurian yen, Japanese yen, and Japanese military yen were all nominally equal.

In August 1937 the Japanese invaded Chahar province, which borders Manchuria and Mongolia. The Japanese puppet Channan Bank exchanged its notes for Nationalist Chinese yuan at one-to-one from 1-20 October 1937. On 1 December 1937 the Bank of Inner Mongolia took over the note issue fo the Channan Bank. This bank and the currency it issued ceased in October? 1945, following Japan's surrender to end the Second World War.

For the remainder of north China, the Japanese puppet Federal Reserve Bank of China began operations on 10 March 1938. The Federal Reserve Bank yuan was initially equal to the Nationalist Chinese yuan (fapi) and to Japanese yen circulating in north China. On 7 August 1938, the Japanese puppet Provisional Government of China in Peking announced that the exchange rate would be 0.90 Federal Reserve Bank yuan = 1 Nationalist Chinese yuan. In February 1939, the government announced that the exchange rate would be 0.60 Federal Reserve Bank yuan = 1 Nationalist Chinese yuan. In March 1939, Nationalist Chinese yuan were prohibited from circulating in north China. On 5 October 1938, the Federal Reserve Bank established an exchange rate of 1 Federal Reserve Bank yuan = UK 1 shilling 2 pence (approximately 17.14 Federal Reserve Bank yuan = UK£1). (Officially, the Federal Reserve Bank yuan was also still equal to the Japanese yen..) With the outbreak of the Second World War in the Pacific on 8 December 1941, the exchange rate with the pound sterling became a dead letter. On 8 December 1942, Japanese forces took over the international enclaves in the treaty ports. The Japanese allowed Nationalist Chinese yuan in those areas to be exchanged at 1 Federal Reserve Bank yuan = 4 Nationalist Chinese yuan from 9-13 February 1942. On 22 November 1945, the Nationalist government began a currency conversion at 1 Chinese Nationalist yuan = 5 Federal Reserve Bank of China yuan, and the Federal Reserve Bank yuan went out of existence.

In Shanghai, the Japanese opened the China Development (Hua Hsing) Bank on 1 May 1939 (or perhaps 10 May; sources are contradictory); it issued a small amount of notes until 18 February 1941. Its notes were pegged to the Nationalist Chinese yuan at one-to-one. Likewise, the Central Reserve Bank of China yuan, issued starting 6 January 1941 ([Japanese puppet] Republic of China, legislation of 19 December 1940), was initially pegged at 1 Central Reserve Bank yuan = 1 Nationalist Chinese yuan. The Central Reserve Bank took over note issuance from the China Development Commercial Bank on 19 February 1941, at 1.7575 Central Reserve Bank yuan = 1 China Development Bank yuan. A decree of 7 June 1942 by the Finance Ministry of the Japanese puppet Republic of China altered the official exchange rate to 1 Central Reserve Bank of China yuan = 2 Chinese Nationalist yuan. The Central Reserve Bank of China yuan ceased to exist in November 1945, following Japan's surrender to end the Second World War.

Interregional exchange was conducted at an exchange rate of 1 Central Reserve Bank yuan = 0.18 Japanese military yen = 0.18 Federal Reserve Bank yuan, or approximately 5.55 Central Reserve Bank yuan = 1 Federal Reserve Bank yuan. This official rate persisted until the end of the Second World War, but the black market rate was approximately 16 Central Reserve Bank yuan = 1 Federal Reserve Bank yuan near the end of the war. Exchange controls were in effect that limited the amount of currency people from one currency zone could exchange for the currency of another zone.

After conquering much of south China in October 1938, the Japanese took over the Kwangtung Provincial Bank in Canton (Guangzhou). Under Japanese occupation, it made an issue of notes in 1939 for Hainan Island and starting in 1940 issued notes for elsewhere in south China. Apparently this currency was equal to the currency of the Central Reserve Bank of China. In mid 1942, the Central Reserve Bank of China opened branches in Canton and other cities of south China and the notes of the Kwangtung Provincial Bank seem to have been frozen. An exchange of Central Reserve Bank of China notes for Chinese Nationalist notes at was made starting 10 July 1942 in south China other than Hong Kong. Apparently the exchange rate, as in central China at the time, was 1 Central Reserve Bank of China yuan = 2 Chinese Nationalist yuan. There was also a final exchange period throughout the territory of the Central Reserve Bank of China from 2 November-1 December 1942. After 1 December 1942, Nationalist-issued currency was prohibited in Japanese-occupied central and south China. The Nationalist Chinese government set an exchange rate of 1 Nationalist Chinese yuan = 200 Central Reserve Bank of China yuan for purposes of conversion in October? 1945, and the Central Reserve Bank yuan went out of existence.

Because of the extraterritorial status of the treaty ports, use of Nationalist-issued currency continued to be legal in those areas, which included the most important financial districts in China. The use of Nationalist currency in the treaty ports was an important factor in helping it retain its value. It remained the preferred currency for use in foreign trade even though Japanese puppet currency became more and more widely used over time for domestic trade with the Japanese-controlled areas. Use of Nationalist currency ceased to be legal in the treaty ports when the Japanese overran them on 8 December 1941 to begin the Second World War in the Pacific.

As has been mentioned, Japanese troops used Japanese military yen as official currency in various parts of China, starting in late 1937. In 1938, military yen replaced Japanese yen. In early 1940, military yen notes replaced all other yen notes that had been circulating in the Shanghai area. At the end of 1940, the market rate of exchange was approximately 0.6 Japanese military yen = 1 Nationalist Chinese yuan. The Japanese withdrew military yen in 1940 in Inner Mongolia and north China, where the respective puppet central banks took over issuing currency. The exchange rate between the military yen and the replacement puppet currencies was one-to-one. In central and south China except Hong Kong, currency of the Central Reserve Bank of China replaced Japanese military yen on 1 April 1943 (Japanese military authorities in China, decision of 24 March 1943). Hong Kong had a special regime described in its country table. Military yen were widely used in central and south China. In mid 1942, certain railroads and utilities controlled by the Japanese quoted an exchange rate of 1 Central Reserve Bank of China yuan = 0.18 Japanese military yen. On 24 March 1943, the Japanese authorities decided to cease issuing military yen in central and south China. Effective 1 April 1943, Central Reserve Bank of China notes replaced military yen at 1 Central Reserve Bank of China yuan = 0.18 Japanese military yen.



Exchange rate arrangements: south China

South China introduced its own currency, the Canton yuan, in late 1935 after the Chinese yuan ended convertibility into silver on 4 November 1935. Initially it floated, but it was stabilized in June 1937 at 1 Canton yuan = 1.44 Chinese yuan. The Japanese invasion of October 1938 put an end to it, although the Japanese later issued their own occupation currency in southern China (see above).



Exchange rate arrangements: treaty ports

From 1844 to 1941, a number of foreign powers (France, Germany, Japan, United Kingdom, United States) operated enclaves in the so-called treaty ports that were under home-country rather than Chinese law. I use the term "treaty ports" to include all cities where enclaves existed. These tables do not deal with the treaty ports. For the most part, foreign note-issuing banks in the treaty ports denominated their notes in Chinese currency or in silver dollars rather than in the currencies of their home countries.



Exchange rate arrangements: Tibet

Special remark: Information was hard to find. I welcome comments from knowledgeable readers.

Dates Arrangement Legal basis Remarks
1772

-1913

1 Tibetan tangka = about 4-5g silver Tibet seems to have minted its own coins as early as the 1760s. A mint opened in Lhasa in 1792. Tibetans also used Indian and Chinese coins. In the Tibetan monetary system, 1 tangka = 1.5 sho =15 skar.
13 January? 1913

-1936?

[exchange rate type unknown]; 1 Tibetan tam = [anchor unknown] Introduced the tam, equal to the tangka.
1936?

-August 1959

officially, hard peg, 1 Tibetan srang = 4 Indian annas = 0.25 Indian rupee; in practice, clean? float Tibet introduced the srang by the 1930s; 7.5 Tibetan srangs = 50 Tibetan tam (tangka); also, 1 Tibetan srang = 10 Tibetan sho. The srang depreciated from apparently about 15g silver in 1919 to about 4g silver in 1936-1946.
August 1959

-present

fixed (as part of currency union); uses Chinese yuan (renminbi) Tibet's Chinese occupiers demonetized the srang, exchanging it for Chinese yuan at 1 Chinese yuan = 50 Tibetan paper srang.



China: Hong Kong



Political sketch

A colony of the United Kingdom de facto from 26 January 1841 until it rejoined China 1 July 1997.

Hong Kong Island was sparsely inhabited before British rule. In 1839 the Chinese government launched a campaign against opium, the major export (grown in India) the British used to pay for Chinese tea. The British retreated to Macau and demanded either a commercial treaty or a small island from which they could conduct trade. Fighting in the waters off Hong Kong Island expanded into the First Opium War (1839-1842). The Treaty of Nanking, which ended hostilities, ceded the island of Hong Kong to the British in 1842. British forces had occupied the islands since 26 January 1841. As Chinese power waned in the late 1800s, the British acquired more territory. They obtained Stonecutters Island and the Kowloon Peninsula in perpetuity in 1860, and in 1898 obtained a 99-year lease on the New Territories, an area comprising 235 islands off the mainland and mainland territory bordering the Kowloon Peninsula. Hong Kong had no significant natural resources other than its fine port, but it thrived under free-market economic policies underpinned by British rule of law. It attracted significant numbers of Chinese immigrants. On 7 December 1941 Japan attacked Hong Kong as part of its strategy to conquer all of East Asia. Hong Kong surrendered on 25 December 1941. It returned to British rule after the war, on 7 September 1945.

After the Communist takeover of China in 1949, many entrepreneurs relocated to Hong Kong from Shanghai and other cities. Hong Kong became one of the few windows for the rest of the world into China, and assumed more importance than ever as a point of intermediation for trade with China. Hong Kong began an economic boom that by the 1980s brought its living standards up to the level of the world's richest countries. Industrialization in the 1960s was based on textile manufacturing and then increasingly on electronics, finance, and trade as relations with China improved from the mid 1970s. In 1982 the United Kingdom and China began talks concerning the 1997 expiration of the lease on the New Territories, with China arguing that all Hong Kong should be returned to Chinese rule at that date. In 1984 the United Kingdom agreed to the Chinese position. Following several years of negotiations, the Chinese government in 1990 ratified a law promising considerable autonomy for Hong Kong for fifty years after return to Chinese rule. Hong Kong returned to Chinese rule on 1 July 1997 as a Special Administrative Region. Its government has a limited form of democracy, which China does not wish to become fully democratic. At almost the same time, East Asia began to experience a financial crisis that affected Hong Kong somewhat. More difficult economic times replaced the long boom that had run since the 1950s. Now that China is more economically open and Hong Kong is no longer under British rule, it is trying to shift its economic base again.



Wars since 1500

First Opium War, 1839-1842 (United Kingdom versus China); Second World War, 1941-1945 (United Kingdom, United States, and China against Japan). Before British rule began in the 1840s Hong Kong was very sparsely inhabited; for wars, see China.



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

When the United Kingdom introduced exchange controls on 4 September 1939, Hong Kong was initially exempted because the United Kingdom regarded it as economically a part of China. Hong Kong introduced exchange controls on 21 March 1940 (under Hong Kong, Defence [Finance] Regulations, Government Notification No. 328, 21 March 1940), and became part of the sterling area on 1 August 1941 (Hong Kong, Government Notification No. 897, 31 July 1941). After the Second World War, foreign exchange business was permitted again from 12 November 1945. Government regulations of 1 January 1946 permitted an open market in foreign exchange. Hong Kong had a free market in gold after the Second World War until April 1949, when the British government suppressed it as being inconsistent with Britain's obligations under the International Monetary Fund's Articles of Agreement. A free market in US dollars replaced it; along with the market in Kuwait, it was one of the "holes" in the sterling area. The government initially tolerated it, then gave it official sanction in 1967. The purpose of the free market was to facilitate Hong Kong's status as a trading port. On 5 June 1950 capital movements between Hong Kong and other sterling area countries became subject to controls; the purpose of this regulation was to prevent capital flight from the sterling area through the free US dollar market in Hong Kong. Hong Kong left the sterling area on 23 June 1972. It abolished exchange controls on 1 January 1973 as a result of the United Kingdom's Defence (Finance) Regulations on 31 December 1972. On 24 September 1973 banks in Hong Kong became free to run positions in any currency without consulting the government.

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

During the Second World War, Japan established a system of exchange centralization on 21 March 1943 for transactions among Hong Kong, Thailand, French Indochina, north China, and Manchukuo (Manchuria). A separate procedure was established for exchanges among Hong Kong, Singapore, and the Philippines. Trade between Japan and Hong Kong, and between Hong Kong and central China, was settled in Japanese military yen.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Five of 11 banks closed as a result of the English and Indian financial panics of 1866; runs against Chinese banks 1926 (mentioned in Mackenzie 1954: 237); failure of a small bank 1961; failure of one bank owned by Hong Kong Chinese and runs on others early 1965; runs 1967 during the turmoil of the Cultural Revolution in China, which had political repercussions in Hong Kongm, but no bank failures; minor failures 1982-1983 and 1983-1986; withdrawals from Chinese government-owned banks 1989 to protest the Tienanmen Square massacre in Peking; failure of the local subsidiary of Bank of Credit and Commerce International and minor runs on other banks 1991; minor runs 1998.

Frankel and Rose (1996) list of currency crashes: None, but Hong Kong was affected by the East Asian currency crisis in 1998 (see below).

Unusually for a British colony, in Hong Kong the Hongkong and Shanghai Banking Corporation was allowed to issue notes for as little as Hong Kong $1 starting in 1872. Typically the British government forbade notes smaller than local £1 (= UK£1), or the roughly equivalent sum of local $5 (= Spanish, Mexican, or US $5) in colonies where the dollar was the unit of account.

Hong Kong's currency reform of 6 December 1935 established a system whereby banks had to obtain Certificates of Indebtedness from Hong Kong's Exchange Fund to issue notes. Over time the conditions for obtaining the certificates have varied, accounting for differences in Hong Kong's monetary authorities. The system of Certificates of Indebtedness still exists today.

From 14-28 August 1998, during the East Asian currency crisis, the Hong Kong Monetary Authority took the highly unusual step for any monetary authority of buying Hong Kong $115 billion of stock to discourage a "double play" of speculation against the Hong Kong dollar and Hong Kong stocks.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Bányai (1974), Chalmers (1893), Donnison (1956), Fujita (2003), King (1987-91), King and Jao (1990).



Monetary authorities: China: Hong Kong

Dates Type Name Legal basis Remarks
April 1845

-5 December 1935

free banking multiple banks (eight issued notes) India, Bank of Western India, deed of settlement of 1842; United Kingdom, Oriental Bank, royal charter of 30 August 1851; United Kingdom, Chartered Mercantile Bank of India, London and China, royal charter of 15 September 1857; various other bank charters and articles of association, plus Hong Kong, Ordinance No. 5 of 1866 (for the Hongkong and Shanghai Banking Corporation) The first bank was the Oriental Bank (headquarters London, England, in April 1845. The bank was originally established 1842 as the Bank of Western India, with its headquarters in Bombay (now Mumbai), India. It moved its headquarters to London in 1845 and after it received a royal charter in 1851 it was known as the Oriental Banking Corporation. The second bank was the Chartered Mercantile Bank of India, London and China (headquarters London, England), on 1 August 1857. Both these banks established their branches in Victoria (now called Central), on Hong Kong island. By 1866, Hong Kong had 11 banks, of which 6 issued notes. The English and Indian financial panics of that year made five banks (not all note-issuing) close. By 1892 there were only two note-issuing banks, the Hongkong and Shanghai Banking Corporation (headquarters Hong Kong; it had the great bulk of local note issue) and the Chartered Bank of India, Australia and China (headquarters London, England; ancestor of today's Standard Chartered Bank). The Mercantile Bank of India (headquarters London, England), formed from the wreckage of the Chartered Mercantile Bank of India, London and China, was allowed to issue notes in 1902. An 1895 ordinance prohibited banks from issuing notes without local government approval (Hong Kong, Ordinance No. 2 of 1895). The first coins were issued about 7 May 1866 (Hong Kong, Ordinance No. 2 of 1864).
6 December 1935

-25? December 1941

currency board Exchange Fund (headquarters Hong Kong) Hong Kong, Currency Ordinance, No. 54, 6 December 1935 Hong Kong established a currency board to centralize monetary policy following China's abandonment of the silver standard. The three note-issuing banks (the Hongkong and Shanghai Banking Corporation, the Chartered Bank of India, Australia and China, and the Mercantile Bank of India) continued to issue distinctive notes, but as agents for the Exchange Fund, under rules determined by it.
26? December 1941

-31 May 1943

currency board (see Remarks) alongside occupation currency three banks as agents for the Exchange Fund (headquarters Hong Kong), plus Japanese (military) government (headquarters Tokyo, Japan) Japanese military government, actions of 26? December 1941 onwards The Japanese issued occupation currency following their invasion of Hong Kong during the Second World War. The three banks that issued notes as agents of the Exchange Fund had failed to destroy all of the unissued notes in their vaults before the occupation occurred. The Japanese forced these notes into circulation; they were called the "duress issues." The Exchange Fund held its assets in London, out of reach of the Japanese. The Yokohama Specie Bank (headquarters Yokohama, Japan) acted as the agent for the military government.
1 June 1943

-13 September 1945

occupation currency Japanese (military) government (headquarters Tokyo, Japan) Japanese military government, decision of 1 June 1943 The Japanese declared occupation currency to be the only legal currency. Even so, the public continued to hold notes issued by the banks (as agents for the currency board) as stores of value. Occupation currency depreciated rapidly.
14 September 1945

-5 July 1972

currency board Exchange Fund (headquarters Hong Kong) British Military Administration, Hong Kong, British Military Administration Proclamation, No. 1, 1 September 1945; Proclamation No. 5, 12 October 1945; Hong Kong, Ordinance No. 13 of 1946 Japan surrendered to end the Second World War. The British Military Administration Proclamation restored laws in effect before Japanese occupation. Hence the currency board was re-established. The Exchange Fund accepted liability for the duress issues. By 1949, the Exchange Fund had re-established foreign reserves of 100% of monetary liabilities, although it did not announce that it had reattained that level until 1953. The Exchange Fund published no financial statements from 1941 until resuming in 1992.
6 July 1972

-25 November 1974

currency board-like Exchange Fund (headquarters Hong Kong) Hong Kong government, administrative decision of 6 July 1972 Monetary policy became no longer passive, quite possibly as a result of inadvertence rather than a deliberate government policy. The note-issuing banks no longer had to pay foreign assets to the exchange fund to receive Certificates of Indebtedness.
26 November 1974

-16 October 1983

free issue Exchange Fund (headquarters Hong Kong) Hong Kong government, administrative decision of 24 November 1974 The government abandoned the remaining elements of the currency board system when it allowed the Hong Kong dollar to float during problems following the breakup of the Bretton Woods system.
17 October 1983

-17 July 1988

currency board Exchange Fund (headquarters Hong Kong) Hong Kong, Monetary Affairs Branch, "Government Measures to Stabilize the Exchange Rate: Explanatory Note," 15 October 1983 Restored the currency board system to stabilize the monetary system in the midst of a currency crisis spurred by fears about China's intentions concerning Hong Kong.
18 July 1988

-present

currency board / currency board-like (see Remarks) Exchange Fund or Wai Hui Ji Jin / Hong Kong Monetary Authority or Xiang Gang Jin Rong Guan Li Ju 1 April 1993-present (headquarters for both Hong Kong) Hong Kong, Monetary Affairs Office, New Accounting Arrangements Between the Exchange Fund and the Hongkong and Shanghai Banking Corporation, 15 July 1988; Exchange Fund (Amendment) Ordinance, No. 82 of 1992 The monetary authority became an increasingly unorthodox currency board. It first issued Exchange Fund Bills (securities) in March 1990 and established a Liquidity Adjustment Facility in June 1992. It has become more orthodox since 5 September 1998, in the aftermath of the East Asian financial crisis of 1997-1998 (Hong Kong Monetary Authority, "Strengthening of Currency Board Arrangements in Hong Kong," press release of 5 September 1998, nicknamed the "seven technical measures"). As of 2004, three banks issue distinctive designs of notes as agents of the Exchange Fund: the Hongkong and Shanghai Banking Corporation (headquarters of holding company London, England), the Standard Chartered Bank (headquarters London, England), and the Bank of China (headquarters Peking [Beijing], China).



Exchange rate arrangements: China: Hong Kong

Dates Arrangement Legal basis Remarks
1841

-28 March 1842

fixed; used Spanish silver dollar and other foreign currency no legislation China ceded Hong Kong to the United Kingdom in 1841. Spanish silver dollars were the preferred currency of the Chinese for long-distance trade.
29 March 1843

-1845

fixed; used Mexican and similar silver dollars Hong Kong, governor's proclamations of 29 March 1842 and 27 April (or possibly 27 May) 1842 These proclamations established legal tender; that of 27 April 1842 made Mexican and other similar silver dollars the standard in all government and commercial transactions. The Hong Kong dollar did not exist as an officially separate currency in this period.
1845

-1 May 1863

fixed; UK 4 shillings 2 pence = Mexican and Spanish $1, or UK£1 = approximately Mexican and Spanish $9.23 United Kingdom, royal proclamation under Order in Council of 28 November 1844 The British government revoked the governor's proclamations of 1842 as contrary to the policy of attempting to the pound sterling as the currency of British colonies. In Hong Kong, this meant British silver coins rather than the gold sovereign as the basis of the currency. In practice, the 1844 proclamation was a dead letter. The silver dollar remained the main means of exchange and, except for the government itself, the unit of account. The legal tender of silver coins was limited from 1 October 1853 (United Kingdom, royal proclamation of 16 October 1852; Hong Kong, government notice of 27 April 1853). Hong Kong's Chief Justice in 1854 ruled that when contracts were made in dollars, payment must be made in dollars.
2 May 1863

-1 February 1895

fixed; Hong Kong $1 = Mexican $1 = 24.44g silver United Kingdom, royal proclamation under Order in Council of 9 January 1863 (published in Hong Kong 2 May 1863); Hong Kong, Ordinance No. 1 of 1864 This legislation repealed previous proclamations regarding Hong Kong currency, and made provision for striking Hong Kong dollar coins. Local dollars and half-dollars were declared legal tender along with the Mexican dollar (Hong Kong, governor's proclamation of 14 September 1866). The Hong Kong dollar was a decimal currency.
2 February 1895

-5 January 1935

fixed; floor of Hong Kong $1 = Mexican $1 = 24.44g silver (see Remarks) During this period, Hong Kong dollar notes sometimes went to a premium to silver because of restrictions on note issue by banks. There was a silver reserve requirement of 100% beyond a certain uncovered (fiduciary) issue. In addition, the Hongkong and Shanghai Banking Corporation, the largest in the colony, faced a tax of 1% a year on its notes in circulation; the tax was eliminated in 1929. In the period 1926-1931 the premium on notes rose to as much as 20%.
6 January 1935

-September 1939

de facto crawling peg; Hong Kong $15.36-16.45 = UK£1 Hong Kong, Currency Ordinance, No. 54, 6 December 1935 Switched to pound sterling as the anchor currency following China's abandonment of silver standard. (China initially also pegged its currency to the pound sterling.) The exchange rate offered by the Exchange Fund fluctuated slightly depending on market conditions.
September 1939

-1 January 1942

fixed; Hong Kong $16.00 = UK£1, or Hong Kong $1 = UK 1 shilling 2-29/32 pence Hong Kong, Exchange Fund announcement of September 1939 The Exchange Fund announced it would maintain a constant exchange rate.
2 January 1942

-August 1942

hard peg; Hong Kong $2 = 1 Japanese military yen (= 1 Japanese yen) Japanese military government of Hong Kong, decision of 2 January 1942 The Japanese issued a military yen upon invading Hong Kong during the Second World War and forced issues of currency board "duress notes." The Hong Kong dollar ceased being convertible into pound sterling during the war. Convertibility of military yen into Japanese yen was limited. The prewar exchange rate had been about Hong Kong $1.1 = 1 Japanese yen.
August 1942

-31 May 1943

hard peg; Hong Kong $4 = 1 Japanese military yen (= 1 Japanese yen) Japanese military government of Hong Kong, decisions of 2 January 1942 and August 1942 Japanese devalued Hong Kong dollar in an attempt to promote greater acceptance of military yen. In the black market, the military yen was depreciating, and people held currency board notes, even duress issues, as stores of value.
1 June 1943

-13 September 1945

hard peg; 1 Japanese military yen = 1 Japanese yen Japanese military government of Hong Kong, proclamation of 10 May 1943 Japanese occupation currency was declared to be the only legal currency. Even so, the public continued to hold notes issued by the banks (as agents for the currency board) as a store of value. Occupation currency depreciated rapidly.
14 September 1945

-20 August 1948?

fixed; Hong Kong $16.00 = UK£1 British Military Administration, Hong Kong, British Military Administration Proclamation, No. 1, 1 September 1945; Proclamation No. 5, 12 October 1945; Hong Kong, Ordinance No. 13 of 1946 Japan surrendered to end the Second World War. The British Military Administration Proclamation restored laws in effect before Japanese occupation. Hence the Hong Kong dollar was re-established as the currency. The Exchange Fund accepted liability for the duress issues. The military administration allowed a currency exchange at a rate of 100 Japanese military yen = Hong Kong $1, up to a maximum of 500 military yen. As a result of these actions, the Exchange Fund's ratio of foreign reserves to monetary liabilities fell below 100 percent until 1950. Hong Kong was subject to the exchange rate regulations of the sterling area, but it had a free market in US dollars (where US dollars traded at fluctuating exchange rates) to help preserve its role at an entrepot.
21 August 1948?

-22 January 1959

multiple rates (versus US dollar), fixed; Hong Kong $16.00 = UK£1 Established multiple rates against the US dollar, although a single rate continued to apply against the pound sterling. The Exchange Fund apparently did not trade US dollars; it confined its activities to trade with the pound sterling, the anchor currency. Multiple rates against the dollar existed to facilitate Hong Kong's role as an entrepot.
23 January 1959

-22 November 1967

fixed; Hong Kong $16.00 = UK£1 Narrowed the multiple rates against US dollar to a spread of less than 1% in response to changes the United Kingdom had made to its exchange controls on 29 December 1958. Multiple rates in this form persisted until eliminated on 24 June 1972 (see below). The rates in question were the official rate, the free market, rate, and four blends of the first two rates in varying proportions.
23 November 1967

-5 July 1972

fixed; Hong Kong $14.5545 = UK£1 Hong Kong government, administrative decision, 23 November 1967 Hong Kong revalued to offset most of the pound sterling's devaluation of 18 November 1967 from UK£1 = US$2.80 to UK£1 = US$2.40. Under the Bretton Woods system, the Hong Kong dollar was indirectly pegged to the US dollar through the pound sterling. The link ceased on 23 August 1971 and resumed on 20 December 1971. The United Kingdom floated the pound sterling on 23 June 1972, again breaking the indirect peg to the dollar. On 24 June 1972, the distinction between the free market and official rates of the Hong Kong dollar ceased.
6 July 1972

-13 February 1973

hard peg; Hong Kong $5.65 = US$1 Hong Kong government, administrative decision of 6 July 1972 Switched to the US dollar as the anchor currency in a delayed reaction to the floating of the pound sterling on 23 June 1972. The cross rate before the pound sterling was floated was Hong Kong $5.582 = US$1. The new rate was in effect a revaluation against the pound sterling. Hong Kong adopted wider margins.

RR: De facto moving band of +/-2% around US dollar, dual market with trivial parallel market premium.

14 February 1973

-24 November 1974

hard peg; Hong Kong $5.085 = US$1 Hong Kong government, administrative decision of 14 February 1973 Did not follow the devaluation of the US dollar on 13 February 1973.

RR: De facto moving band of +/-2% around US dollar, dual market with trivial parallel market premium.

25 November 1974

-16 October 1983

managed float (see Remarks) Hong Kong government, administrative decision of 24 November 1974 Adopted a floating exchange rate because the pound sterling and the US dollar were both experiencing problems of credibility at the time. The management of the float was not typical of such an exchange rate because of Hong Kong's peculiar "free issue" system.

RR: De facto moving band of +/-2% around US dollar, dual market with trivial parallel market premium.

17 October 1983

-17 July 1988

fixed; Hong Kong $7.80 = US$1 Hong Kong, Monetary Affairs Branch, "Government Measures to Stabilize the Exchange Rate: Explanatory Note," 15 October 1983 The period of floating ended in a currency crisis spurred by fears about China's intentions concerning Hong Kong. Hong Kong restored the currency board system and a fixed exchange rate to the US dollar to end the crisis.
18 July 1988

-present

rigid (unclear whether fixed or hard peg); Hong Kong $7.80 = US$1 Hong Kong, Monetary Affairs Office, New Accounting Arrangements Between the Exchange Fund and the Hongkong and Shanghai Banking Corporation, 15 July 1988; Exchange Fund (Amendment) Ordinance, No. 82 of 1992; Hong Kong Monetary Authority, "Strengthening of Currency Board Arrangements in Hong Kong," press release of 5 September 1998 (nicknamed the "seven technical measures") This marks the point when the monetary authority began to become less of an orthodox currency board. The "seven technical measures" of 5 September 1998 made the system somewhat more orthodox after its unorthodox features led to interest-rate spikes during the East Asian financial crisis of 1997-1998. Among other things, the seven technical measures granted access to the official rate for all banks, not just the three banks with the largest local presence as previously. The exchange rate for issuance and withdrawal of coins settled at Hong Kong $7.80 = US$1 on 1 April 1999. The Exchange Fund's separate exchange rate for deposits since 5 September 1998 (initially Hong Kong $7.75 = US$1) was increased at a rate of HK$0.0001 per day from 1 April 1999 until on 12 August 2000 it reached the rate of Hong Kong $7.80 = US$1 that applied to notes and coins. The Hong Kong Monetary Authority still maintains some discretion regarding the exchange rate. In particular, as of 2004 it promises to exchange Hong Kong dollars into US dollars without limit, but not necessarily the reverse. This asymmetric commitment resulted in a slight appreciation of the Hong Kong dollar against the US dollar in late 2003.



China: Macau



Political sketch

Name also spelled Macao. A Portuguese colony from 1680 until rejoining China on 20 December 1999.

The first Portuguese ship anchored in the Pearl River estuary in 1513, and further Portuguese visits followed regularly. Trade with China was placed on an official basis in 1553, and Macau became the main point for international trade with China and Japan. In 1557 China agreed to a Portuguese settlement in Macau but did not recognize Portuguese sovereignty. The first Portuguese governor was appointed to Macau in 1680. China's trade with the outside world was gradually centralized in Canton (Guangzhou) in the late 1700s, but foreign merchants were allowed into Canton only during the trading season (November to May), so they took up residence in Macau. In 1849 Portugal ceased paying rent to China and closed the Chinese custom house in Macau, in effect declaring Macau to be Portuguese territory; China eventually recognized Portugal's ownership in an agreement of 26 March 1887. By the mid 1800s the nearby British colony of Hong Kong eclipsed Macau in trade, and Macau became a sleepy minor port. During the Second World War, Japanese forces did not occupy Macau, though they easily could have, and the territory temporarily hosted to a large influx of refugees. After the war Macau became known for light manufactured goods and gold smuggling. Tourism from Hong Kong became very important in the 1960s. Casino gambling, not legal in Hong Kong, attracted many day-trippers and continues to do so today (2004). In 1987 Portugal and China reached an agreement to return Macau to Chinese rule in December 1999. The agreement followed a similar agreement of 1984 reached by the United Kingdom and China regarding Hong Kong. They agreed upon provisions to insure the autonomy of Macau, including its right to elect local leaders, the right of its residents to travel freely, and the right to maintain its way of life for 50 years after the start of Chinese rule. Macau rejoined China as a Special Autonomous Region on 20 December 1999.



Wars since 1500

None.



Convertibility

Portugal introduced exchange controls on 24 September 1914 and revoked them on 18 October 1937. There were also a few controls from perhaps 1939 to 1947. Controls were intensified in the summer of 1947, made extensive on 9 February 1948, and removed on 1 January 1993, long after Portugal had ceased to have any colonies except the Chinese city of Macau.

The escudo, introduced in Portugal in 1911 and in its African colonies in 1914, was a chronically weak currency until the currency reform of 1928. Not all colonial escudos were convertible into the Portuguese escudo at par. In 1948 the separate colonial foreign-currency funds were centralized in Lisbon. The currency reform of 1953 unified the Portuguese escudo and the currencies of the Portuguese colonies, making them a true currency area similar to the sterling area or the French franc zone. A Monetary Fund of the Escudo Zone was established by Portugal, Decree-Law 44/703 of 17 November 1962. However, Angola and Mozambique were persistently in deficit to the fund. The result was that high-priority payments were settled immediately at 1 overseas escudo = 1 Portuguese escudo, while low-priority payments experienced delays, which were a form of rationing, until the funds were available to settle them at the official rate. Exchange controls on private transfers from overseas territories to Portugal were imposed by Portugal, Decree-Law 478/71 of 6 November 1971.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Failure of a leading Chinese bank 1902; a run on the Banco Luso Internacional in March 1983 (not fatal to the bank); a run on the Wing Hang Bank in September 1985 (not fatal to the bank).

Frankel and Rose (1996) list of currency crashes: Macau not included.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Banco Nacional Ultramarino (1981), Coehlo (1991), Lacerda (1997), Ma (1987).



Monetary authorities: China: Macau

Dates Type Name Legal basis Remarks
1800s?

-26 January 1906

free banking multiple banks (more than a dozen issued notes) customary Exchange brokers called pangtans issued cash deposit certificates. The first modern bank was apparently the Banco Nacional Ultramarino (headquarters Lisbon, Portugal), which established a branch in Macau in 1902, following the closure of a major Chinese bank. It did not at first issue notes. Hong Kong notes were also used, and continued to circulate widely in Macau today (2004).
27 January 1906

-1944

officially, private monopoly issue; in practice, free banking Banco Nacional Ultramarino (headquarters Lisbon, Portugal) and multiple local bankers Portugal, law of 16 May 1864 chartering Banco Nacional Ultramarino In this period, the Banco Nacional Ultramarino officially had a monopoly of note issuance, but pangtan certificates continued to circulate widely.
1944

-31 December 1979?

private monopoly issue Banco Nacional Ultramarino (headquarters Lisbon, Portugal) Macau, Diploma Legislativo 847, Boletim Oficial no. 24, 1944 The government of Macau suppressed pangtan certificates. The first coins were issued in 1952.
1 January 1980?

-30 June 1989

monetary institute Instituto Emisor de Macau (headquarters Macau) Portugal transferred note issue to a Macau government body as a way of giving Macau greater local autonomy (Macau, Estatu Orgánico de Macau, Artigo 31.1(n), 1977). There was a requirement for 100% reserves in foreign assets, but it seems to have applied for notes and coins only, not all assets of the Instituto Emisor.
1 July 1989

-present

central bank Autoridade Monetária e Cambial de Macau / Autoridade Monetária de Macau (Monetary Authority of Macau) from 15 February 2000 (headquarters for both Macau) Macau, legislation of 1 July 1980 Reorganized the monetary authority and granted it greater powers.



Exchange rate arrangements: China: Macau

Dates Arrangement Legal basis Remarks
1500s

-26 January 1906

fixed; used Spanish and later Mexican silver reals (dollars, peso, patacas) "Pataca" is the Portuguese word for the coin elsewhere called the real, piece of eight, or dollar. In 1894, an exchange rate of 1 Macau pataca = 450 Portuguese milreis was established, but it appears this was only an accounting rate that was periodically revised in light of fluctuations between silver and gold.
27 January 1906

-early January 1935

hard peg; 1 Macau pataca = Mexican silver $1 = Hong Kong silver $1 The Banco Nacional Ultramarino issued its first pataca notes. The Macau pataca was a decimal currency. On 11 May 1911, the exchange rate with the recently created Portuguese escudo was 1 Macau pataca = 5.60 Portuguese escudos, but it appears again that this was only an accounting rate. The Portuguese escudo was a chronically weak currency until Portugal's currency reform of April 1928, which stabilized it at 108.25 Portuguese escudos = UK£1.
early January 1935

-18 September 1949

hard peg, 1 Macau pataca = 5.50? Portuguese escudos Macau followed China and Hong Kong off the gold standard. Officially the pataca was linked to the Portuguese escudo, which itself had a hard peg of 110 Portuguese escudos = UK£1 during this period, but unlike Portugal's African colonies or Goa, Macau never changed the name of its currency to "escudo."
19 September 1949

-26 November 1967

hard peg; 1 Macau pataca = 5 Portuguese escudos The pataca followed the devaluation of the Hong Kong dollar (then linked to the pound sterling). The cross rate was such that 1 Macau pataca = approximately Hong Kong $1.
27 November 1967

-25 March 1973

hard peg; 1 Macau pataca = 4.75 Portuguese escudos The pataca again followed the devaluation of the Hong Kong dollar (then linked to the pound sterling). The new cross rate was again such that 1 Macau pataca = approximately Hong Kong $1 initially. In terms of the US dollar, the rate depreciated from 5.75 Macau patacas = US$1 to 6.0527 Macau patacas = US$1.
26 March 1973

-6 April 1977

hard peg; 1 Macau pataca = 5.015 Portuguese escudos On 19 March 1973, the Portuguese escudo in effect became a floating currency. The pataca depreciated with the Portuguese escudo, from 1.047 Macau patacas = Hong Kong $1 in March 1974 to a low of 1.21 Macau patacas = Hong Kong $1 on 10 March 1976, before rallying to 1.06 Macau patacas = Hong Kong $1 in May 1976 and staying around that level.
7 April 1977

-29 December 1978

hard peg; 1.075 Macau patacas = Hong Kong $1 Officially detached the pataca from the Portuguese escudo and pegged it to the Hong Kong dollar.
30 December 1978

-31 December 1978

hard peg; 1.0025 Macau patacas = Hong Kong $1 Revalued in an apparent attempt to re-establish an exchange rate of one-to-one with the Hong Kong dollar.
1 January 1979

-10 May 1983

hard peg; 1.0425 Macau patacas = Hong Kong $1 Quickly reversed the previous revaluation because of protests by local businesses who objected that it would hurt their competitiveness.
11 May 1983

-present

hard peg; 1.03 Macau patacas = Hong Kong $1 Revalued the pataca slightly during the currency crisis Hong Kong was suffering at the time.



Cyprus



Political sketch

Independent from the United Kingdom on 16 August 1960.

In the 1400s Cyprus was part of the empire of Venice. Ottoman Turks conquered Cyprus in 1571. Uprisings in protest of Turkish policies (especially high taxes) began in the 1700s and continued into the 1800s. An Ottoman crackdown on Greek Cypriots in 1821, when Greeks in several other Ottoman provinces were revolting for a Greek state, left lasting resentment of Ottoman rule. In July 1878 the United Kingdom assumed control of Cyprus in agreement with the Turkish sultan, who remained sovereign. The supposed purpose was to enable the United Kingdom to help the Ottoman Empire contain Russian expansion, but in reality it was more connected with the British desire to acquire territory in the area near the Suez Canal. After the First World War broke out in 1914, the United Kingdom annexed Cyprus on 5 November 1914. On 16 October 1915, the United Kingdom offered Cyprus to Greece if Greece would abandon its neutrality and join the Allied side in the First World War. Greece refused, so the offer lapsed. Cyprus became a British crown colony on 10 March 1925. During the Second World War, Cyprus was an important base of British operations in the eastern Mediterranean.

A Greek Cypriot movement for union with Greece accelerated after the Second World War, punctuated by terrorism against Cypriot and British opponents. The Turkish minority agitated for partition. A compromise joint government with majority Greek representation was approved in 1959, and Cyprus became an independent republic on 16 August 1960, but violence continued, erupting in organized fighting in 1963-1964. In July 1974 the Cyprus National Guard, under Greek officers, staged a coup. Turkish forces then invaded Cyprus to prevent union with Greece. They controlled the northern third of the country when a cease-fire was declared a month later. The Turkish Cypriots established a functioning government but obtained recognition as a sovereign country only from Turkey. An economic gap opened: southern Cyprus moved towards a Western European standard of living from a diversified economy based on tourism, light manufacturing, agriculture, and financial services, while northern Cyprus remained at the much lower level of Turkey. Southern Cyprus will become a member of the European Union on 1 May 2004. As of February 2004, reunification talks are showing some signs of progress.



Wars since 1500

Venetian-Turkish War of 1570-1573; Cyprus Uprising of 1804; First World War, 1914-1918; Cyprus Uprising of 1931; Second World War in Europe, 1939-1945 (Germany and allies against United Kingdom, United States, and allies); Cypriot Guerilla Campaign of 1955-1959 (Greek and Turkish Cypriot terrorist groups against fellow countrymen and United Kingdom); Greek-Turkish Cypriot War of 1963-1964 (Greek Cypriots against Turkish Cypriots); Greek-Turkish Cypriot War of 1974 (Greek Cypriots against Turkey and Turkish Cypriots).



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Before it became independent, Cyprus had exchange controls like those of the United Kingdom. Cyprus left the sterling area on 23 June 1972. On 6 July 1972, the Exchange Control (Amendment) Law and the Exchange Control (the Republic) Order were published in the government gazette and became effective. They empowered the Council of Ministers to treat the pound sterling and sterling area currencies as foreign currencies, therefore subject to exchange controls.



Other

During the Second World War, Palestine Currency Board notes were temporarily declared legal tender (Cyprus, governor's proclamation [possibly No. 467/42], 5 May 1942). At the time, supplies of notes from the United Kingdom were irregular because of problems of transporting them through hostile territory, and the Palestine Currency Board had extra stocks of notes. Palestine notes circulate from 5 May 1942 until 17 November 1942, when they were retired.

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Run on several locally owned banks in late August 1939, apparently related to the outbreak of the Second World War.

Frankel and Rose (1996) list of currency crashes: Cyprus not included.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Adler (1937), Eldem (1999a), Phylaktis (1995), Pridmore (1975).

Monetary authorities: Cyprus

Dates Type Name Legal basis Remarks
May 1864

-1876

coins only? The first bank was the Banque Ottomane Impériale (also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank) (headquarters Constantinople [now Istanbul], Turkey), in Larnaca, in May 1864 (Ottoman Empire, Act of Concession of the Imperial Ottoman Bank, 4 February 1863). It is not clear to me whether the bank actually issued notes in Cyprus.
1876

-1880s

government issue caime (also spelled kaime), issued by Treasury of the Ottoman Empire (headquarters Constantinople [now Istanbul], Turkey) The second bank was the Anglo-Egyptian Bank (headquarters London, England), in Larnaca, in 1878. The bank also opened a branch in Nicosia later in 1878, but the bank left the island in 1889.
1880s

-September 1914

dollarization pound sterling (issued by central bank Bank of England [headquarters London, England]) Ottoman government notes were gradually withdrawn from circulation under British rule, which began 1878, and seem to have been phased out by 1880s. Turkish coins circulated extensively; it is not clear to what extent the notes of the Ottoman Bank circulated.
September 1914

-31 October? 1928

government issue government of Cyprus (headquarters Nicosia, Cyprus) Cyprus, High Commissioner's proclamation of 5 September 1917 The British colonial authorities issued notes following the annexation of Cyprus by the United Kingdom during the First World War. Cyprus used British coins.
1 November? 1928

-1958 or 1959

currency board Cyprus, Commissioner of Currency (headquarters Nicosia, Cyprus) Cyprus, Order in Council No. 1249 and 1250, both 3 September 1928 Replaced government issue having rather loose rules with a more formal currency board arrangement, as was by then standard in British colonies.
1958 or 1959

-26 June 1963

currency board-like Cyprus, Commissioner of Currency (headquarters Nicosia, Cyprus) Cyprus, Law No. 17 of 1958 The new law allowed the Commissioner of Currency to hold local government securities of up to Cyprus £3 million. The Commissioner took advantage of this provision, so by the end of the system, roughly 20% of assets were domestic.
27 June 1963

-present

central bank Kentrik Trapeza Kyprou or Kibris Merkez Bankas (Central Bank of Cyprus) (headquarters Nicosia, Cyprus) Cyprus, Central Bank of Cyprus Law, No. 48 of 1963 Established a central bank to satisfy nationalist sentiment. The central bank issued its first notes on 27 June 1963 and its first coins in November 1963. The central bank took over administrative responsibility for issuing notes and coins from the Commissioner of Currency on 1 January 1964. Cyprus joined the IMF on 21 December 1961.



Exchange rate arrangements: Cyprus

Dates Arrangement Legal basis Remarks
to October 1878 fixed; used Ottoman lira (pound) coinage and managed? floating government paper notes (caime, also spelled kaime) The Ottoman currency system of the time was at 1 Ottoman lira (or pound, made of gold) = 5 medjidie (silver) = 100 piastres (silver) = 4,000 paras (copper). The silver piastre was the dominant coin.
October 1878

-February 1901

fixed; used Ottoman lira (pound) coinage, managed? floating Ottoman government paper notes (until the 1880s), and British coins Cyprus, British High Commissioner's notice of October 1878 Shortly after Britain took control of Cyprus, British coins were added to the list of legal tender coins (though British gold sovereigns had previously been accepted under Ottoman rule). The Ottoman lira (pound) became a decimal currency in 1881.
February 1901

-31 October? 1928

hard peg; Cyprus £1 = UK£1 United Kingdom, Cyprus Coinage Order, No. 5459, 17 September 1900; Cyprus, proclamation of 3 January 1901 Adopted the pound sterling as the anchor for a new local coinage. Rather than the submultiples of the Cyprus pound being 12 shillings = 240 pence, as with the pound sterling, they were 180 piastres.
1 November? 1928

-1958 or 1959

fixed; Cyprus £1 = UK£1 Cyprus, Order in Council No. 1249 and 1250, both 3 September 1928; Cyprus Currency Notes Order, 1 November 1928 Established a currency board. The currency became decimalized on 1 August 1955, with Cyprus £1 = 1,000 mils.
1958 or 1959

-24 July 1962

hard peg; Cyprus £1 = UK£1 Cyprus, Law No. 17 of 1958 Replaced the currency board with a currency board-like system, so the exchange rate became a hard peg rather than fixed.
25 July 1962

-19 November 1967

hard peg; Cyprus £1 = UK£1 = US$2.80

= 2.48828g gold

Cyprus registered a gold parity with the IMF.
20 November 1967

-22 August 1971

hard peg; Cyprus £1 = UK£1 = US$2.40

= 2.13281g gold

a related announcement was Cyprus, statement by the Minister of Finance in the House of Representatives, 21 November 1967 Followed the United Kingdom's devaluation of the pound sterling of 18 November 1967.
23 August 1971

-19 December 1971

hard peg; Cyprus £1 = UK£1 = 2.13281g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Cyprus remained pegged to the pound sterling and in effect unpegged from the US dollar. The Cyprus pound began to appreciate against the US dollar. Cyprus adopted wider margins.
20 December 1971

-28 June 1972

hard peg; Cyprus £1 = UK£1 = US$ 2.l60571= 2.13281g gold (nominally) Re-established a peg to the US dollar after the United States devalued the dollar against gold on 18 December 1971. The pound sterling remained the anchor currency.
29 June 1972

-15 February 1973

hard peg; Cyprus £0.383772 = US$1, or Cyprus £1 = 2.13281g gold (nominally) Cyprus, Council of Ministers, decision of 29 June 1972 Maintained the nominal gold parity and floated against the pound sterling after the United Kingdom floated the pound sterling on 23 June 1972.

RR: Peg to gold.

16 February 1973

-8 July 1973

hard peg; Cyprus £0.345395 = US$1, or Cyprus £1 = 2.13281g gold (nominally) Did not follow the devaluation of the US dollar on 13 February 1973.

RR: Peg to gold.

9 July 1973

-31 March 1978

in practice, basket; officially, hard peg, Cyprus £1 = 2.13281g gold (nominally) Cyprus, government decision of 9? July 1973 Ceased to maintain the old margins, and guided the exchange rate through reference to an undisclosed basket of the currencies of major trading partners.

RR: De facto crawling band of +/-2% around German mark.

1 April 1978

-18 June 1992

basket International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members. On 1 October 1983 the subdivision of the Cyprus pound changed from 1,000 mils to 100 cents.

RR: De facto crawling band of +/-2% around German mark.

19 June 1992

-31 December 1998

hard peg; Cyprus £1 = 1.7086 European Currency Units (ECUs) Switched to the ECU as the anchor currency at the prevailing cross rate. The purpose was to signal Cyprus's desire to join the European Union eventually. The margins of fluctuation were +/-2.25%. The US dollar remained the intervention currency.

RR: De facto peg to German mark.

1 January 1999

-31 December 2000

hard peg; Cyprus £1 = 1.7086 euros Switched to the euro as the anchor currency when Western European countries introduced the euro to replace the ECU. The margins of fluctuation remained +/-2.25%.

RR: De facto peg to euro.

1 January 2001

-present

band; Cyprus £1 = 1.7086 euros +/-15% Widened the margins of fluctuation and liberalized interest rates and various exchange controls. Although the "hard" band widened to +/-15%, the previous margins of +/-2.25% continued as a "soft" band through 12 August 2001.

RR: De facto peg to euro (to December 2001, when their coverage ends).



Cyprus, Turkish Republic of Northern



Political sketch

De facto independent from Cyprus on 19 July 1974.

For the earlier history of the area, see Cyprus. The so-called Turkish Republic of Northern Cyprus was established after Turkey invaded Cyprus in July 1974 to prevent a Greek Cypriot military government, which had just attained power in a coup, from seeking union with Greece. The Turkish Republic of Northern Cyprus occupies nearly 40 percent of the island of Cyprus, a substantially larger proportion than the share of Turks in the population of the island. The country has not received international recognition; only Turkey acknowledges it. The Turkish Republic of Northern Cyprus is in practice an autonomous province of Turkey. It has become closely tied to Turkey economically, with the result that it suffered Turkey's problems and has fallen far behind the Greek southern part of Cyprus. Over the years, the Turkish government has granted large subsidies to the Turkish Republic of Northern Cyprus. Southern Cyprus is preparing to join the European Union on 1 May 2004, which should further enhance its economic growth, while Turkey will remain outside the European Union for the foreseeable future. As of February 2004, there are some signs of progress in reunification talks between Cyprus and the Turkish Republic of Northern Cyprus. Northern Cyprus has had only one president, Rauf Denktash, during its existence.



Wars since 1500

Before 1974, see Cyprus; Greek-Turkish Cypriot War of 1974 (Greek Cypriots against Turkey and Turkish Cypriots).



Convertibility

Uses Turkish lira, about 20 July 1974-present; subject to same exchange controls as Turkey.



Other

Defaults on or restructurings of debt to the foreign private sector: None. The country has never issued internationally traded debt because it has not received international recognition.

Banking crises: Apparently none, though information is sketchy.

Frankel and Rose (1996) list of currency crashes: 1978, 1984, and 1988 for Turkey itself.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Apparently none in Western European languages.



Monetary authorities: Cyprus, Turkish Republic of Northern

Dates Type Name Legal basis Remarks
about 20 July 1974

-present

dollarization (as part of de facto currency union) Turkish lira (issued by central bank Central Bank of Turkey [headquarters Ankara, Turkey]) Before this, see Cyprus. Invading Turkish forces introduced the Turkish lira. There exists a so-called Central Bank of the Turkish Republic of Northern Cyprus (headquarters Lefkosa [Nicosia],Turkish Republic of Northern Cyprus), established by the Central Bank of the Turkish Republic of Northern Cyprus Law, perhaps passed in 1983. Its Turkish name is Kuzey Kibris Türk Cumhuriyeti Merkez Bankas.

However, it does not issue currency; rather, it is the exchange control authority and the depository of the government's foreign exchange.





Exchange rate arrangements: Cyprus, Turkish Republic of Northern

Dates Arrangement Legal basis Remarks
about 20 July 1974

-present

fixed (as part of de facto currency union); uses Turkish lira perhaps Turkish Republic of Northern Cyprus, Money and Foreign Exchange Law, 1982 Before this, see Cyprus. Invading Turkish forces introduced the Turkish lira. The Turkish lira was a decimal currency.



India



Political sketch

Independent from the United Kingdom on 15 August 1947.

India has a long history of advanced civilization. Its modern history may be said to have begun when the Portuguese navigator Vasco da Gama reached India by sea in 1498. At the time, the leading states in India were the Muslim sultanate of Delhi in the north and the Hindu kingdom of Vijayanagar in the south. There were also various smaller principalities. The Mughal (Mogul) Empire supplanted the Delhi sultanate in 1526,and by the late 1600s it had expanded over most of India. The Dutch, English, and French followed the Portuguese in search of lucrative opportunities for trade. They established monopoly companies to carry out trade with India and other countries around the Indian Ocean; the best-known was the British East India Company. Territorial acquisition was not a prominent concern until forces under the British East India Company defeated a combined Mughal and French force in 1757, resulting in British supremacy in Bengal (Calcutta and the surrounding area). Thereafter British conquests spread rapidly, and by 1818 the British had defeated the Hindu Marathas, who had risen up against the Mughals in the late 1800s and established their own large empire. By the time of the defeat of the Sikh kingdom in 1849, virtually the whole of India was under the British East India Company. The Indian Mutiny of 1857-8 confirmed the existence of grave deficiencies in the company's administration of India, and on 1 November 1858 the British government took over the rule of India from the company. The French and Portuguese retained small colonial outposts whose importance diminished substantially after the British achieved domination.

Under the rule of the East India Company and later the British government, modern economic institutions such as corporate banks and railways were established. India remained, as it had long been, the center of trade of the Indian Ocean basin. However, the large local weaving industry was demolished by competition from British textile manufacturers.

Indian nationalist sentiments crystallized in the establishment of the Indian National Congress in 1885, which was initially loyal to the British but later pressed for a greater Indian voice in government. Indian Muslims afraid they would be subordinated to those of the dominant Hindu population established the Muslim League in 1906. Despite the granting of limited self-government under the Government of India Act of 1919, the Indian National Congress sanctioned a series of noncooperation and civil-disobedience campaigns, beginning in 1920 under the leadership of Mahatma Gandhi. The Government of India Act of 1935 expanded the powers of the elected provincial and national legislatures and helped lay the groundwork for full independence. By 15 August 1947, when Britain finally granted full independence, the rift between the Muslim League and the Indian National Congress had become unbridgeable. The United Kingdom and the Indian National Congress agreed to Muslims' demand for a separate state of Pakistan, created from the predominantly Muslim northwestern and northeastern portions of India. The partition of India occasioned much bloodshed. The partition of Jammu and Kashmir still has not been peacefully resolved, and has occasioned several wars or near-wars between India and Pakistan. Tensions between the majority Hindu and minority Muslim populations in India continue to be a source of political instability. There are also other ethnic tensions, notably with Sikhs, who have sought to establish an independent state in Punjab.

The leader of the Congress Party, Jawaharlal Nehru, became India's first prime minister. He, his daughter Indira Gandhi (assassinated on 31 October 1984), and his grandson, Rajiv Gandhi, guided India as prime minister or as major political influences for all but a few years until Rajiv's assassination on 21 May 1991. Rajiv Gandhi turned India away from the heavily interventionist economic policies it had followed since independence, which had produced disappointing results and were leaving India farther and farther behind its neighbor and rival China after China began economic reforms in the late 1970s. Later governments have continued the direction Rajiv Gandhi established, though often in fits and starts. India's rate of economic growth has accelerated. Most Indians are today (2004) employed in small-scale farming, but India has become a growing provider of service industries to the rest of the world and has developed a significant middle class.

Here are brief remarks on other territories that comprise part of present-day India.

Andaman and Nicobar Islands: Denmark, the United Kingdom, and other countries made attempts to colonize the Andaman or Nicobar Islands, but the first lasting presence was established by the United Kingdom, in the Andaman Islands, starting 22 January 1858. The United Kingdom annexed the Nicobar Islands in 1869, and joined the two island groups in a single administrative unit in 1872. The islands were part of the British administration of Burma from 1864-1868, but otherwise were part of the British administration of India. They were occupied by Japan from 23 March 1942-9 October 1945, during the Second World War, and given to India at India's independence on 15 August 1947.

Goa: Colony of Portugal 1510-19 December 1961. India invaded Goa starting 18 December 1961 and had the support of most inhabitants.

Hyderabad: Formally joined India 26 January 1950.

Jammu and Kashmir: After periods of Mughal, Afghan, and Sikh rule, the British sold Kashmir to the Hindu ruler of Jammu after they defeated the Sikhs in 1846. When India and Pakistan were created in 1947, the Hindu maharajah of predominantly Muslim Jammu and Kashmir hesitated whether to join India, Pakistan, or remain independent. Fighting between India and Pakistan broke out over control of the region, ending with a cease-fire on 1 January 1949. Further battles occurred in 1965 and 1971, and tension continues to the present (2004).

Pondicherry: In 1666 France created the Compagnie des Indes Orientales. Its first settlement was in Surat in 1668, followed by Chandernagore in Bengal in 1673. The most important French settlement, was Pondicherry, on the eastern coast (Coromandel coast), purchased in 1674. Mahe, located on the Malabar coast, was founded in 1725, Yanaon (Yanam) and Karaikal, both on the Coromandel coast, respectively in 1731 and 1739. France's Indian territories were taken by the United Kingdom during certain wars with France, then returned. Chandernagore was handed over to India on 2 February 1951. The other French enclaves were handed over to India on 1 November 1954 and constitute the Union Territory of Pondicherry.

Sikkim: The United Kingdom made Sikkim a protectorate in 1861 after warfare. It became a protectorate of India rather than an Indian state when India became independent on 15 August 1947. India annexed Sikkim on 16 May 1975.

Denmark established major colonies at Tranquebar in 1620 and Serampore. The Danish presence ended in 1845 when the colony was sold to the British. The Danish also claimed the Nicobar Islands (called by them the Frederik Islands), which they gave to the British in 1868. The Netherlands established its first colony in the city of Pulicat in 1610 and handed over its last colony to the British in 1824. Both the Danish and the Dutch issued coins, although not notes, for their Indian colonies.



Wars since 1500

Bahmani Civil War of circa 1490-1512 (region around Delhi); Portuguese Conquests in India and the East Indies, 1500-1545; Portuguese Campaigns Against Island of Diu, 1509-1547; Vijanyanagar Wars of 1509-1565 (of a southern Indian kingdom with its neighbors); Conquests of Babur, 1524-1529 (Afghan ruler who conquered northern India); First Mogul War against Gujarat, 1535-1536; Early Mogul Wars against the Sur Dynasty, 1535-1536; Later Mogul Wars against the Sur Dynasty, 1556-1557, 1575-1576; Mogul Conquest of Rajasthan, 1561-1595; Second Mogul War against Gujarat, 1572-1573; Mogul Civil War of 1600-1605; Mogul Civil War of 1607; Conquests of Shah Jahan, 1613-1621 (Shah Jahan was a Mogul prince, later emperor); Mogul-Persian War of 1622-1623; Shah Jahan's Revolt, 1622-1626; Mahabat Khan's Insurrection, 1626-1623 (in Bengal); Portuguese-Mogul Wars of 1631-1632; Wars of Aurangzeb, 1636-1657 (Aurangzeb was a Mogul prince, later emperor); Mogul-Persian War of 1638; Maratha-Mogul War of 1670-1680; Mogul-Sikh War of 1675-1708; Rajput Rebellion against Aurangzeb, 1679-1709; Maratha-Mogul War of 1681-1705; Bengalese-British War of 1686; Mogul Civil War of 1707-1708; Mogul-Sikh War of 1709-1716; Mogul Civil War of 1712-1720; Burmese-Manipuri War of 1742 (Manipur is in northeastern India); First Carnactic War, 1744-1748 (United Kingdom and Indian allies against France and Indian allies); Second Carnactic War, 1749-1754 (United Kingdom and Indian allies against France and Indian allies); Burmese-Manipuri War of 1755-1758; Bengalese-British War of 1756-1757; Afghan-Maratha War of 1758-1761; Bengali-British War of 1763-1765; Burmese-Manipuri War of 1764; First Mysore War, 1767-1769 (United Kingdom against Mysore); Burmese-Manicure War of 1764; Rohilla War, 1774 (United Kingdom and Oudh against Maratha Confederation and Rohillas); First Maratha War, 1775-1782 (United Kingdom against Maratha Confederation); Second Mysore War, 1780-1784 (United Kingdom against Mysore); Third Mysore War, 1790-1792 (United Kingdom against Mysore); Fourth Mysore War, 1799 (United Kingdom against Mysore); Second Maratha War, 1803-1805 (United Kingdom and one Maratha faction against another faction); Vellore Mutiny, 1806 (against the United Kingdom's British East India Company); Gurkha War, 1814-1816 (Nepali Gurkhas against United Kingdom); Third Maratha War, 1817-1818 (United Kingdom against Maratha Confederation); Barrackpore Mutiny, 1824; First Sikh War, 1845-1846l; Second Sikh War, 1848-1849; Indian Mutiny (Sepoy Mutiny), 1857-1858 (against the British East India Company); Bhutanese-British War of 1865; Chitral Campaign, 1895 (United Kingdom against local tribes in what is now northern Pakistan); Amritsar Massacre, 1919 (of Indians by British-led troops); Second World War in the Pacific, 1941-1945 (Japan against United States, United Kingdom, Netherlands, China, and allies); Indian Civil War and Indo-Pakistani War of 1947-1948 (by Hindus and Muslims as India was partitioned); Annexation of Hyderabad and Junagadh, 1948; Nagaland Insurgency, 1954-1975; Sino-Indian Border Dispute, 1959-1962; Annexation of Goa, 1961; Indo-Pakistani War of 1965; Indo-Pakistani War of 1971 (India supported the secession of Bangladesh from Pakistan); Annexation of Sikkim, 1975; Siege of the Sikh Golden Temple (by Sikh nationalists), 1984; Kashmiri Insurgency of 1988-present (by Pakistanis and local Muslims supported by Pakistan); Destruction of the Babri Mosque, 1992 (by a Hindu mob).



Convertibility

India introduced restrictions on exchanging local currency for gold starting 5 August 1914, just after the First World War began. Foreign exchange between India and the United Kingdom was restricted in December 1916. India, ordinance of 29 June 1917, require all gold imported into the country to be sold to the government. The government also forbade melting down gold or silver coins was also sometime in June 1917. It forbade importation of solver on private account on 3 September 1917, and forbade the export of silver coin or gold bullion sometime in September 1917. These restrictions were apparently removed by 1925, when the United Kingdom resumed the gold standard after having abandoned it in 1914.

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

India introduced exchange controls on 3 September 1939, soon after the Second World War began (India, Governor-General, Defence of India Rules, 3 September 1939). These controls also applied to modern-day Bangladesh and Pakistan, which at the time were part of India. As of 1949, when the IMF first records data, India had no exchange controls with Afghanistan, Nepal, Pakistan (which then included present-day Bangladesh), Tibet, or the French and Portuguese colonies in India. India imposed controls with Afghanistan and Pakistan (including present-day Bangladesh) on 27 February 1951.India eliminated the distinction between transfers of capital to sterling area and non-sterling area countries on 25 June 1962. It left the sterling area on 23 June 1972.



For Goa: Portugal introduced exchange controls on 24 September 1914 and revoked them on 18 October 1937. There were also a few controls from perhaps 1939 to 1947. Controls were intensified in the summer of 1947, made extensive on 9 February 1948, and removed on 1 January 1993, long after Portugal had ceased to have any colonies except the Chinese city of Macau.

The escudo, introduced in Portugal in 1911 and in its African colonies in 1914, was a chronically weak currency until the currency reform of 1928. Not all colonial escudos were convertible into the Portuguese escudo at par. In 1948 the separate colonial foreign-currency funds were centralized in Lisbon. The currency reform of 1953 unified the Portuguese escudo and the currencies of the Portuguese colonies, making them a true currency area similar to the sterling area or the French franc zone. A Monetary Fund of the Escudo Zone was established by Portugal, Decree-Law 44/703 of 17 November 1962. However, Angola and Mozambique were persistently in deficit to the fund. The result was that high-priority payments were settled immediately at 1 overseas escudo = 1 Portuguese escudo, while low-priority payments experienced delays, which were a form of rationing, until the funds were available to settle them at the official rate. Exchange controls on private transfers from overseas territories to Portugal were imposed by Portugal, Decree-Law 478/71 of 6 November 1971.



For Pondicherry: When the First World War began, France imposed a moratorium of payments on all negotiable instruments starting 1 August 1914. The moratorium was subsequently extended by decrees until 1 March 1915. The central bank, the Bank of France, abandoned the gold standard on 5 August 1914, although no official prohibition on exporting gold existed until by a decree of 3 July 1915, affirmed by a law of 15 November 1915. A decree of 2 April 1918 prohibited capital exports without authorization. A law of 25 June 1928 officially restored the gold standard and repealed exchange controls. When the French franc was an object of currency speculation , a law of 13 August 1936 imposed extensive exchange controls, supplementing some lesser measures that had been implemented in 1935.

France imposed exchange controls on 9 September 1939 by a decree of that date, after the Second World War broke out in Europe. On 20 May 1940 capital controls within the franc zone were greatly relaxed by a French decree of that date. On 28 January 1941 the Free French government in exile and the United Kingdom concluded an agreement establishing a customs union between the French colonies in India and India itself, and incorporating the French colonies into the sterling area. On 27 March 1945 an Anglo-French agreement withdrew the French colonies from the sterling area and reattached them to the French franc zone, subject to exchange controls for certain purposes. Exchange controls within the franc zone were not removed until 6 June 1946. France had multiple exchange rates from 26 January 1948 until 17 October 1948, and a dual exchange rate from 18 October 1948 to 29 September 1949. On 20 September 1949 it devalued the French franc and unified the exchange rate, taking advantage of the lead offered by the United Kingdom, which had devalued the pound sterling on 18 September 1949.



Other

The small princely states of Dhrangadhra, Morvi, and Nawanagar printed emergency notes during the First World War (1914-1918). Morvi notes circulated, but the notes of the other two states may not have circulated.

The Indian rupee was widely used in the countries of the Persian Gulf and Arabian Peninsula in the early and mid 1900s (and in some cases even earlier). The government of India established a separate currency, the Gulf rupee, for circulation exclusively outside the country (India, Reserve Bank of India [Amendment] Act, 1 May 1959). In doing so, the government hoped to reduce the drain on its foreign reserves from gold smuggling with the countries of the Persian Gulf. After India devalued the rupee on 6 June 1966, the countries using the Gulf rupee--Oman, Qatar, and what are now the United Arab Emirates--decided to replace the Gulf rupee with national currencies. Kuwait had already done so in 1961, and Bahrain had done so in 1965.

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: a series of failures 1916-1918 related to the sharp increase in the price of silver relative to gold; nonsystemic problems 1993-past 1999.

Frankel and Rose (1996) list of currency crashes: 1991.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources:

India: Bagchi (1987, 1997), Balachandran (1998), Chalmers (1893), Gupta (2000), Jain (1933), Kemmerer (1916), Mitra (1991), Reserve Bank of India (1970), Sadeque (1965). There are also histories of a number of individual banks, such as the Chartered Mercantile Bank of India, London, and China (later the Mercantile Bank of India); the Indian Bank; the National Bank of India and Grindlays Bank (which later merged to form National and Grindlays Bank); and the Punjab National Bank. Finally, there are old studies of particular periods that are now long past, such as Keynes (1971 [1913]).

Goa: Da Cunha (1881); very little in Braga Paixão (1964).

Hyderabad: Jung and Iyengar (1946?).

Pondicherry: Mazard (1953), Meuleau (1990).

Sikkim: Apparently none.

Monetary authorities: India

Dates Type Name Legal basis Remarks
1770

-31 December 1861

free banking multiple banks (at least 12 issued notes) various bank charters and articles of association The first bank was the Bank of Hindostan (headquarters Calcutta, India), in Calcutta, in 1770. The second bank was the General Bank (headquarters Calcutta, India), in Calcutta, in 1773. The first coins were issued in the early 300s BC. There was an attempt by the ruler Muhammed Tughlaq to circulate token coinage from 1330-1332, but it failed because it brought forth too many successful forgeries.
1 January 1862

-31 March 1935

government issue Government of India (headquarters New Delhi, India) India, Paper Currency Act, No. 19, 18 July 1861 The British government took control of India from the British East India Company effective 1 November 1858. The English economist James Wilson influenced the establishment of a government monopoly of note issue in India under rules like those that applied to the Bank of England at the time. There were note "circles" centered on Bombay, Calcutta, and Madras; the notes of each circle were redeemable only at the head office of that circle. The notes of the presidency banks apparently continued to circulate until 1867.
1 April 1935

-present

central bank Reserve Bank of India or Bhratya Rizarva Bainka

(headquarters Bombay [now Mumbai], India)

India, Reserve Bank of India Act, 6 March 1934 Created a central bank to provide greater elasticity of note issue and greater ability to conduct a managed monetary policy. The central bank was nationalized on 1 January 1949 (India, Reserve Bank [Transfer to Public Ownership] Act, 3 September 1948). India joined the IMF on 27 December 1945, as an original member.



Monetary authorities: Andaman and Nicobar Islands

Dates Type Name Legal basis Remarks
22 January 1858

-April? 1942

dollarization Indian rupee (issued by Government of India [headquarters New Delhi, India] / by Reserve Bank of India [headquarters Bombay (now Mumbai), India] from 1 April 1935) India, Paper Currency Act, No. 19, 18 July 1861; Reserve Bank of India Act, 6 March 1934 The islands used Indian currency. The first bank was perhaps the State Bank of India (headquarters Bombay [now Mumbai], India) in Port Blair, year unknown. The second bank is unknown to me.
April? 1942

-August 1944

occupation currency Japanese (military) government (headquarters Tokyo, Japan) Japanese forces invaded and occupied the islands on 23 March 1942, during the Second World War.
August 1944

-October? 1945

occupation currency (issued by joint central bank) Nampo Kaihatsu Kinko (Southern Development Bank) (headquarters Tokyo, Japan) Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank was the Japanese occupation central bank for present-day Brunei, Burma, Indonesia, Malaysia, Philippines, and Singapore. The transfer of liability for notes to the Southern Development Bank occurred in August 1944, but was made retroactive to 1 April 1943.
October? 1945

-14 August 1947

dollarization Indian rupee (issued by Reserve Bank of India [headquarters Bombay (now Mumbai), India]) British rule resumed after the end of the Second World War. The Japanese relinquished control on 9 October 1945.
15 August 1947

-present

central bank (as part of currency union) Reserve Bank of India (headquarters Bombay (now Mumbai), India) India, Reserve Bank of India Act, 6 March 1934 The islands became part of India when India achieved independence from the United Kingdom on 15 August 1947.



Monetary authorities: Goa (Portuguese India)

Dates Type Name Legal basis Remarks
1 October 1883

-1906

government issue Junta de Fazenda Publica do Estado de India Portuguese (headquarters Nova Goa, Goa) Convention between Governors-General of British India and Portuguese India, 18 March 1880; Portuguese India, Provincial Determination No. 566, 27 September 1883 Goa (Portuguese India) issued notes that were denominated in Indian rupees and accepted at Indian banks.
1906

-31 December 1961?

private monopoly issue Banco Nacional Ultramarino (headquarters Lisbon, Portugal) Portugal, law of 16 May 1864 chartering bank; Portuguese India, Decree No. 5/1902, 27 February 1902 The Banco Nacional Ultramarino, Portugal's monopoly note issuer for its colonies, opened a branch in Goa. It was the first bank. The second bank is unknown to me.
1 January 1962?

-present

central bank (as part of currency union) Reserve Bank of India (headquarters Bombay [now Mumbai], India) India, Reserve Bank of India Act, 6 March 1934 India invaded Goa and replaced Goa's currency with Indian currency.



Monetary authorities: Hyderabad

Dates Type Name Legal basis Remarks
by end 1867

-22 July 1918

dollarization Indian rupee (issued by Government of India [headquarters New Delhi, India]) India, Paper Currency Act, No. 19, 18 July 1861 The first bank was the Bank of Bombay (headquarters Bombay [now Mumbai], India), in Hyderabad, sometime in the 1860s by the end of 1867. The second bank was the Bank of Bengal (headquarters Calcutta, India), in Hyderabad, at the beginning of 1868.
23 July 1918

-30 March 1951

government issue Kazani-i-Amira (Central Government Treasury of Hyderabad) (headquarters Hyderabad, Hyderabad) Hyderabad, Hyderabad Currency Act, No. 2 of 1917-1918 The princely government began issuing notes to counteract the shortage of silver coins resulting from the First World War.
1 April 1951

-present

central bank (as part of currency union) Reserve Bank of India (headquarters Bombay (now Mumbai), India) India, Reserve Bank of India Act, 6 March 1934; Indian Currency (Legal Tender) Regulation, 15 January 1950 Hyderabad ceased issuing its own currency and became fully part of the Indian currency union. Hyderabad currency was demonetized in 1959.



Monetary authorities: Jammu and Kashmir

Dates Type Name Legal basis Remarks
1877

-around 1880?

government issue government of Kashmir (headquarters Srinigar, Kashmir) The British allowed Jammu and Kashmir to issue its own notes. The issue was short-lived. I found no definitive information on the first and second banks to open in the territory. Cox and Company (headquarters London, England) opened a branch in Srinigar in 1907 but probably was not the first bank.
around 1880?

-31 March 1935

another type of government issue (as part of currency union) Government of India (headquarters New Delhi, India) India, Paper Currency Act, No. 19, 18 July 1861 Used Indian currency.
1 April 1935

-present

central bank (as part of currency union) Reserve Bank of India (headquarters Bombay [now Mumbai], India) India, Reserve Bank of India Act, 6 March 1934 A central bank replaced government issue. The Pakistani part of the region has used Pakistani currency since 1 April 1948, when Pakistan began to have a separately marked currency from India.



Monetary authorities: Pondicherry (French India; also includes Mahe, Yanaon, Karikal, and Chandernagore)

Dates Type Name Legal basis Remarks
1700

-7 January 1877

dollarization (no banks) Indian silver rupee, silver "French rupee" A mint was opened in Pondicherry to make "French rupee" coins. At times the mint also struck gold pagoda coins. Indian coins were the main type in circulation, though. I have been unable to determine if the paper money of the Compagnie des Indes circulated much or at all in the early years of Pondicherry's existence as a French colony.
8 January 1877

-31 October 1954

private monopoly issue Banque de l'Indochine (headquarters Paris, France) France, decree of 21 January 1875 chartering Banque de l'Indochine The Banque de l'Indochine opened a branch in Pondicherry and became the first bank to do so. There may have been no other banks operating in the colony during French rule. Pondicherry and the other French Indian territories were the only French colonies between Africa and Indochina. In 1931, during a period of leftist government, the French state gave itself a 20% share in the bank (France, law of 31 March 1931).
1 November 1954

-present

central bank (as part of currency union) Reserve Bank of India (headquarters Bombay [now Mumbai], India) France, decree of 30 October 1954 Pondicherry became part of India de facto on this date, and officially on 28 May 1956.



Monetary authorities: Sikkim

Dates Type Name Legal basis Remarks
1861?

-15 May 1975

dollarization Indian rupee (issued by Government of India / by Reserve Bank of India [headquarters Bombay (now Mumbai), India] from 1 April 1935) The United Kingdom made Sikkim a protectorate in 1861. It became a protectorate of India rather than an Indian state when India became independent on 15 August 1947. The first bank was the State Bank of India (headquarters Bombay [now Mumbai], India), in Gangtok, in 1966. The second bank is unknown to me.
16 May 1975

-present

central bank (as part of currency union) Reserve Bank of India (headquarters Bombay [now Mumbai], India) India annexed Sikkim.



Exchange rate arrangements: India

Dates Arrangement Legal basis Remarks
to 31 December 1835? fixed; 1 Indian rupee = 11.34g silver This was the traditional weight of the rupee. (The word "rupee"comes from a Sanskrit word meaning "coined silver;" there is an earlier Indo-European word rupa meaning "cattle," which were long used as money in many places). The three presidency zones of the British colonial era initially had separate rupees: the sicca rupee (Calcutta), the old Bombay rupee, and the Madras arcot rupee, each having a slightly different weight. The (British) East India Company tried unsuccessfully to put India on the gold standard by fixing a legal ratio between gold and silver in Bengal in 1766. However, this attempt ceased in 1803 (Bengal, Regulation No. 45 of 1803). The custom was to deduct value for each year since the mint year on a coin to account for wear and tear. Under British rule, many princely states continued to have the right to mint coins. Some continued to do so until as late as 1950, after India became independent. Besides the rupee, commonly used units of account were the lakh (100,000 rupees) and the crore (10 million rupees). These units are still used today in Indian vernacular. In the traditional system of Indian coinage, 1 rupee = 16 annas = 64 pice = 192 pies.
1 January? 1836

-31 December 1852

fixed; 1 Indian rupee = 10.6918g silver (= 0.712787g gold) India, Act No. 17 of 1835 The East India Company made the Madras rupee of the weight established in 1818 the standard for all of India; it was therefore called the "Company's rupee." Calcutta (sicca) rupees ceased to be legal tender as of 1 January 1838 (East India Company, Act No. 13 of 1836). The 1835 act also provided for coining the gold mohur, which was done beginning 1 September 1835. East India Company, proclamation of 13 January 1841, explicitly allowed mohurs to be used in paying the government, though they were not legal tender for paying private persons. The effect was to make India quasi bimetallic at a ratio of 15 units silver =1 unit gold.
1 December 1853

-31 December 1861

fixed; 1 Indian rupee = 10.6918g silver India, notification of 1852 concerning coinage Gold mohurs ceased to be legal tender for paying the government, so India was unequivocally on the silver standard.
1 January 1862

-25 June 1893

hard peg; 1 Indian rupee = 10.6918g silver India, Paper Currency Act, No. 19, 18 July 1861 Government issue replaced free banking. In 1862 the coinage was transferred from the East India Company to the Indian colonial government (India, Act No. 13 of 1862). From 28 October 1868, British and Australian gold sovereigns (£1 pieces) were accepted as equal to 10.25 Indian rupees (India, government notification of 28 October 1868). In 1876, the Indian government was allowed to admit coins of native states as legal tender upon certain conditions (India, Act No. 9 of 1876).
26 June 1893

-31 December 1897?

managed float (limping gold standard) India, Act No. 8, 26 June 1893 India detached from the silver standard as a prelude to a planned full-fledged gold standard. The government announced it would accept gold at a rate such that UK 1 shilling 4 pence (16 pence) = 1 Indian rupee. This set an upper limit to the appreciation of the rupee, whose market rate in 1893 was about UK 1 shilling 2.5 pence (14.5 pence). Recall that in the monetary system of the United Kingdom at the time, £1 = 12 shillings (s.) and 1 shilling = 12 pence (d.), so £1 = 240d.
1? January 1898

-August 1917

hard peg; 15 Indian rupees = UK£1, or 1 Indian rupee = UK 1 shilling 4 pence = UK 16 pence India, Indian Coinage and Paper Currency Act, No. 22 of 1899 India established a pound sterling exchange standard instead of a gold standard. Rupee coins continued to contain the same amount of silver as before. The act of 1899 gave legal tender status to British gold sovereign coins (worth UK£1) and half-sovereigns.
August 1917

-1 February 1920

hard peg; 1 Indian rupee = 10.6918g silver The price of silver rose against gold, because of demand for silver for use in munitions during the First World War. Rupee coins became worth more as metal than as token coins linked to the pound sterling, and the sterling exchange standard broke down. The pound sterling continued to be the intervention currency throughout the 1920s and beyond.
2 February 1920

-23 June 1920

hard peg, 1 Indian rupee = 0.732238g gold India, Act No. 36 of 1920 This exchange rate made was such that 10 Indian rupees = UK£1 at the pre-First World War exchange rate of the pound sterling into gold. At this time, however, the pound sterling was floating against gold.
24 June 1920

-27 September 1920

hard peg; 10 Indian rupees = UK£1, or 1 Indian rupee = UK 2 shillings = UK 24 pence Silver passed its peak of appreciation against gold earlier in 1920 and was depreciating rapidly. This exchange rate amounted to a devaluation, since the floating pound sterling was exchanging at less than its pre-First World War gold value.
28 September 1920

-October 1924

hard peg; 1 Indian rupee = 10.6918g silver The Indian government ceased supporting the previous exchange rate with the pound sterling, which now appeared to overvalue the rupee.
October 1924

-23 March 1927

soft peg; 13-1/3 Indian rupees = UK£1, or 1 Indian rupee = UK 1 shilling 6 pence = UK 18 pence The government started supporting the exchange rate in practice. The peg was a bit wobbly at times but stayed close to the value stated. The United Kingdom returned to the gold standard on 27 April 1925.
24 March 1927

-23 September 1927

hard peg; 13-1/3 Indian rupees = UK£1, or 1 Indian rupee = 0.548925g gold = UK 1 shilling 6 pence = UK 18 pence India, Indian Paper Currency Act, March 1927 The act officially defined the Indian rupee in terms of gold.

RR: Peg to pound sterling / freely falling November 1941-October 1943.

24 September 1927

-17 December 1946

hard peg; 13-1/3 Indian rupees = UK£1, or 1 Indian rupee = UK 1 shilling 6 pence = UK 18 pence India, Governor-General in Council, ordinance of 21 September 1927; government announcement of 24 September 1927 The ordinance removed the obligation of the Indian 1927 act to sell gold or pounds sterling. The announcement specified that the rupee would be pegged to the pound sterling at the new rate.
18 December 1946

-21 September 1949

hard peg; 13-1/3 Indian rupees = UK£1, or 3.308852 Indian rupees = US$1, or 1 Indian rupee = UK 1 shilling 6 pence = UK 18 pence = 0.268601g gold India registered a gold parity with the IMF.
22 September 1949

-5 June 1966

hard peg; 13-1/3 Indian rupees = UK£1, or 4.47619 Indian rupees = US$1, or 1 Indian rupee = UK 1 shilling 6 pence = UK 18 pence = 0.186621g gold India, government announcement of 20 September 1949 Followed the devaluation of pound sterling on 18 September 1949. The Indian rupee became a decimal currency on 1 April 1957.
6 June 1966

-17 November 1967

hard peg; 1 Indian rupee = UK£0.0475 = UK 11.4 pence = 0.118489g gold, or approximately 21.05 Indian rupees = UK£1, or 7.50 Indian rupees = US$1 India, cabinet decision of 4 June 1966, announced 5 June 1966 Devalued.
18 November 1967

-22 August 1971

hard peg; 18 Indian rupees = UK£1, or 7.50 Indian rupees = US$1, or 1 Indian rupee = UK 1 shilling 1-1/3 pence = UK 13-1/3 old pence = 0.118489g gold Did not follow the devaluation of the pound sterling on 18 November 1967. The Indian government closed the foreign-exchange market on 16 August 1971 and allowed it to reopen on 23 August 1971.
23 August 1971

-19 December 1971

hard peg; 7.50 Indian rupees = US$1, or 1 Indian rupee = 0.118489g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. India switched to the US dollar as the anchor currency and floated against the pound sterling during the initial phase of the breakup of the Bretton Woods system.
20 December 1971

-25 June 1972

hard peg; 18.9677 Indian rupees = UK£1, or 7.27927 Indian rupees = US$1, or 1 Indian rupee = 0.118489g gold (nominally) India did not follow the devaluation of the US dollar on 18 December 1971. Rather, it switched back to the pound sterling as its anchor currency and adopted wider margins. The foreign-exchange market closed on 23 June 1972, after the United Kingdom devalued the pound sterling, and reopened on 28 June 1972.
26 June 1972

-24 September 1975

hard peg; 18.9677 Indian rupees = UK£1, or 1 Indian rupee = 0.118489g gold (nominally) Maintained the peg with the pound sterling after the United Kingdom floated the pound sterling against the US dollar and gold on 23 June 1972. India retained the previous now merely notional parity of the rupee with gold.
25 September 1975

-31 March 1978

basket; 1 Indian rupee = 0.118489g gold (nominally) Because the pound sterling was weak in this period, India switched the anchor for the rupee to a weighted basket of currencies. The pound sterling remained the intervention currency. The initial cross rate was 18.3084 Indian rupees = UK£1.

RR: De facto crawling band around US dollar.

1 April 1978

-29 February 1992

basket (IMF: managed float from 1979) International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members. India widened the margins of fluctuation of its basket to +/-5% at a date in 1979 not specified by the IMF source or by central bank reports.

RR: Managed float to July 1979. De facto crawling band of +/-2% around US dollar August 1979-July 1989. De facto crawling peg to US dollar August 1989-July 1991. De facto peg to US dollar from August 1991.

1 March 1992

-28 February 1993

basket, dual rate (IMF: managed float) Reserve Bank of India, press release on "Liberalised Exchange Rate Management System," 29 February 1992 Established a second exchange rate for priority imports. The US dollar became the intervention currency at the start of this period.

RR: De facto peg to US dollar; parallel market premium rose to 27% February 1993.

1 March 1993

-present

managed float (IMF: independent float, reclassified to managed float 1 January 2000) Reserve Bank of India, press release on "Modifications in the Liberalised Exchange Rate Management System (LERMS)," 27 February 1993 Unified the exchange rate and ceased reference to a basket.

RR: De facto peg to US dollar to June 1995. De facto crawling peg to US dollar July 1995-December 2001, with parallel market premium persistently in single digits.



Exchange rate arrangements: Andaman and Nicobar Islands

Dates Arrangement Legal basis Remarks
22 January 1858

-April? 1942

fixed; used Indian rupee Used the Indian rupee because the islands formed part of the sphere of Indian colonial administration.
April? 1942

-August 1944

hard peg; 1 Japanese military rupee = 1 Japanese yen (= 1 Indian rupee) Japanese forces invaded and occupied the islands on 23 March 1942, during the Second World War. The prewar exchange rate had been about 1.3 Japanese yen =1 Indian rupee.
August 1944

-October? 1945

hard peg (as part of currency union); 1 Southern Development Bank rupee = 1 Japanese yen Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes; regulation of Japanese military administration?, August 1944 The Southern Development Bank was the Japanese occupation central bank for southeast Asia. The transfer of liability for notes to the Southern Development Bank occurred in August 1944, but was made retroactive to 1 April 1943. The actual notes in circulation continued to be the old military notes.
October? 1945

-14 August 1947

fixed; used Indian rupee British rule resumed after the end of the Second World War. The Japanese relinquished control on 9 October 1945.
15 August 1947

-present

fixed (as part of currency union); uses Indian rupee The islands became part of India when India achieved independence from United Kingdom on 15 August 1947.



Exchange rate arrangements: Goa (Portuguese India)

Dates Arrangement Legal basis Remarks
1881?

-1 January 1959

hard peg; 1 Portuguese Indian rupia = 10.6256g silver initially = approximately 1 Indian rupee India, Act No. 17 of 1881 The British government made coins for Goa by the 1881 act and they were legal tender in India. There is also an extensive earlier history of coinages for Goa, dating back to the 1500s. I have omitted it because I could not find or piece together a clear account. "Rupia" is the Portuguese word for rupee.
2 January 1959

-31 December 1961?

hard peg; 1 Portuguese Indian escudo = 1 Portuguese escudo Changed the unit of account, in line with most other Portuguese colonies at the time as part of Portugal's efforts to make its colonies part of a unified currency area with Portugal itself. The escudo, unlike the rupia, was a decimal currency. The exchange rate was apparently 1 Portuguese Indian escudo = 6 Portuguese Indian rupias; the exact rate would have been 1 Portuguese Indian escudo = 6.42287 Portuguese Indian rupias.
1 January 1962?

-present

fixed (as part of currency union); uses Indian rupee After India invaded Goa on 18-19 December 1962, it withdrew local currency from circulation and replaced it with Indian currency. I have found no direct information on the exchange rate, but the prevailing rate was such that exchange at 1 Indian rupee = 6 Portuguese Indian escudos would have provided a close approximation.



Exchange rate arrangements: Hyderabad

Dates Arrangement Legal basis Remarks
1858

-25 January 1950

hard peg; 7 hali sicca (osmania sicca) rupees = 6 Indian rupees Hyderabad, Hyderabad Currency Act, No. 2 of 1917-1918, or Hyderabad Currency Ordinance, date unknown to me The osmania rupee had already existed a long time, struck by the princes of Hyderabad in the name of the Mughal emperor. In 1858 the British government gave the princes of Hyderabad the right to continue minting it. "Hali sicca" means "current coins." Notes were called osmania sicca.
26 January 1950

-31 March 1951

hard peg, 7 osmania sicca (hali sicca) rupees = 6 Indian rupees, and fixed, used Indian rupee Indian Currency (Legal Tender) Regulation, 25 January 1950 The Indian rupee became legal tender alongside local currency.
1 April 1951

-present

fixed (as part of currency union); uses Indian rupee applications of India, Indian Coinage Act of 1906 and Currency Ordinance of 1940 Hyderabad ceased issuing its own currency and became fully part of Indian currency union. Hyderabad currency was demonetized in 1959.



Jammu and Kashmir

Dates Arrangement Legal basis Remarks
1877

-around 1880?

hard peg; 1 Jammu and Kashmir rupee = 1 Indian rupee The British allowed Jammu and Kashmir to issue its own notes. The issue was short-lived. The word "rupee"comes from a Sanskrit word meaning "coined silver."
around 1880?

-present

fixed (as part of currency union); uses Indian rupee Uses Indian currency. As a result of the Indo-Pakistani War of 1947-1948, the parts of the region under Pakistani control have used Pakistani currency since Pakistan began to have a currency of separate design on 1 April 1948.



Pondicherry (French India; also includes Mahe, Yanaon, Karikal, and Chandernagore)

Dates Arrangement Legal basis Remarks
1700

-31 December 1871

fixed; 1 silver French rupee = 1 silver Indian rupee = 10.9g silver A mint was opened in Pondicherry to make "French rupee" coins, which it did until 1793; thereafter they were minted in France until 1840. The unit of account and subdivisions were 1 French rupee = 8 fanons = 16 annas. At times the mint also struck gold coins called pagodas. Indian coins were the main type in circulation, though. I have been unable to determine if the paper money of the Compagnie des Indes circulated much or at all in the early years of Pondicherry's existence as a French colony.
1 January 1872

-7 January 1877

fixed; 1 French rupee = 1 Indian rupee French India, governor's arrêté of 7 June 1871 Pondicherry coins were demonetized and only coins current in India circulated.
8 January 1877

-25 December 1945

pegged; 1 French rupee = 1 Indian rupee French India, decree of 7 June 1871 The Banque de l'Indochine opened a branch in Pondicherry. The French rupee was a silver currency-based currency, while the French franc was a gold-based currency. Accordingly, French India, decree of 13 September 1884 provided for a governor's decree setting the exchange rate between the French rupee and the French franc every 12 months depending on the average exchange rate of the preceding 12 months. French India, decree of 22 September 1890 provided for setting the exchange rate every three months. French India, decree of 17 October 1895 provided for setting the exchange rate monthly. Average annual rates varied from 1.44 French rupees = 1 French franc in 1895 to 13.23 French rupees = 1 French franc in 1939. On 28 January 1941, French colonies in India were incorporated into the sterling area.
26 February 1944

-25 December 1945

hard peg; 1 French rupee = 15 French francs, or 1 French rupee = 1 Indian rupee The French rupee was in principle pegged to the French franc, but the Indian rupee was the true anchor currency because of the commercial links between the French settlements and India.
26 December 1945

-25 January 1948

hard peg; 1 French rupee = 36 French francs, or 1 French rupee = 1 Indian rupee France, Avis de l'Office des Changes et de la Caisse Centrale de la France d'Outre-Mer, 26 December 1945 By an Anglo-French agreement of 27 March 1945, French colonies in India withdrew from the sterling area and linked to the French franc zone, subject to additional foreign exchange controls for certain purposes. This exchange rate was the one existing after France's devaluation of 25 December 1945.
26 January 1948

-16 October 1948

hard peg; 1 French rupees = 64.80 French franc, or 1 French rupee = 1 Indian rupee France, Ministry of Finance and Economic Affairs, Avis No. 291 de l'Office des Changes, 26 January 1948 Pondicherry came through the Second World War with far less damage to its economy than France, and was anyway more closely tied to India than to France economically.
17 October 1948

-31 March 1949

hard peg; 1 French rupee = 79.70 French francs, or 1 French rupee = 1 Indian rupee France, Ministry of Finance and Economic Affairs, Avis No. 352 de l'Office des Changes, 17 October 1948 Pondicherry did not follow the devaluation of the French franc on 17 October 1948 from 480 to 864 French francs = UK£1 and from 119.10669 to 214.39 French francs = US$1.
1 April 1949

-26 April 1949

hard peg; 1 French rupee = 79.65 French francs, or 1 French rupee = 1 Indian rupee Made a minor adjustment of the exchange rate with the French franc; the exchange rate of the French franc with other currencies remained unchanged.
27 April 1949

-19 September 1949

hard peg; 1 French rupee = 82.275 French francs, or 1 French rupee = 1 Indian rupee apparently France, Ministry of Finance and Economic Affairs, Avis No. 391 de l'Office des Changes, 27 April 1949 France devalued to 1,062 French francs = UK£1 and 263.50 French francs = US$1. France had multiple exchange rates in this period, so the French rupee was not devalued as much as the French franc.
20 September 1949

-2 November 1954

hard peg; 1 French rupee = 73.50 French francs, or 1 French rupee = 1 Indian rupee France, Ministry of Finance and Economic Affairs, Avis No. 421 de l'Office des Changes, 20 September 1949 France simplified its exchange rate structure and devalued to 1,097 French francs = UK£1 and 272 French francs = US$1. The alteration in the exchange rate of the French rupee against the French franc apparently was part of France's effort to eliminate broken cross rates.
3 November 1954

-present

fixed (as part of currency union); uses Indian rupee France and India, agreement of 21 October 1954; France, Office des Changes, Avis No. 579, 31 October 1954 France ceded Chandernagore to India on 2 February 1951; the Indian rupee had already become the only legal tender there on 2 May 1950. France ceded Pondicherry to India effective 1 November 1954. Pondicherry ceased to be part of the French franc zone and became part of the Indian exchange control area effective the same date. Pondicherry currency was never decimalized. India decimalized its currency on 1 April 1957.



Exchange rate arrangements: Sikkim

Dates Arrangement Legal basis Remarks
1861?

-present

fixed (as part of currency union since 16 May 1975); uses Indian rupee The United Kingdom made Sikkim a protectorate in 1861. It became a protectorate of India rather than an Indian state when India became independent on 15 August 1947. India annexed Sikkim on 16 May 1975.



Indonesia



Political sketch

Formerly the Netherlands East Indies; also known as the Sunda Islands. Independent from the Netherlands on 27 December 1949.

In the 1200s Indian Muslim traders brought Islam to northern Sumatra, and by the 1400s Islam had spread through most of present-day Indonesia except Bali, which remained Hindu. In the 1500s Muslim trading kingdoms fought among themselves for supremacy. When the Portuguese arrived in the Moluccas (Spice Islands) in 1511, followed by Spaniards, Dutch, and British, they easily seized control by setting local rulers against each other. The Dutch East India Company, eventually acquired colonial control over Java, Sumatra, and the Moluccas. By 1700 the Dutch controlled almost all the islands, although they did not fully subjugate Aceh, at the northern tip of Sumatra, until 1904. They retained control with only two brief interruptions during the Napoleonic Wars. British forces took over most of the outer islands under Dutch control by 1799 to 1802,and took over all areas, including the central island of Java, from August 1811 to 1816. The reason for the British conquest was that the Netherlands were then under the domination of France, which was at war with the United Kingdom. The Treaty of London, signed on 17 March 1824, established British and Dutch spheres of influence in Southeast Asia. Under Dutch rule, Indonesia became a significant agricultural exporter, but the Dutch made little effort to educate Indonesians or otherwise accelerate economic development by Indonesians. Dutch and Chinese merchants dominated trade. In 1927 the Indonesia Nationalist Party was formed under the chairmanship of Sukarno (who like many Indonesians had only one name). In 1942 the Japanese invaded Indonesia with only limited opposition because they were regarded as liberators from Dutch colonialism, but they proved to be as brutal as the Dutch.

After the Japanese surrendered to the Allies in September 1945, Sukarno declared the independence of Indonesia. The Dutch tried to regain control, but on 27 December 1949 they granted Indonesia independence with nominal union to The Netherlands. The United States of Indonesia were formed, and Sukarno became president. The future of Irian Barat (West New Guinea; now called Irian Jaya) was left unresolved in the 1949 agreement and proved detrimental to Dutch-Indonesian relations. In view of continuing Dutch control of Irian Barat, Indonesia dissolved the union with the Netherlands in 1954. On 1 October 1962 the Netherlands transferred Irian Barat transitionally to the United Nations, on 1 May 1963 Indonesia became the administering power of the territory, and on 17 September 1969 it became an Indonesian province.

Sukarno's policies, such as nationalization of Dutch-owned companies, discrimination against ethnic Chinese, and confrontation with Malaysia over territory in Borneo (Kalimantan), resulted in high inflation and economic problems. The Communist Party of Indonesia gained growing influence as a rival center of power. On 30 September 1965, communists attempted a coup. It failed, and in retaliation there were massacres of Chinese and suspected Communists. On 11 March 1966 General Suharto in effect took power from Sukarno; Suharto became president in 1968. The Suharto government invaded the former Portuguese colony of East Timor in December 1975, months after it became independent, and brutally incorporated it into Indonesia until ceding control to the United Nations in late 1999; East Timor officially reattained independence on 20 May 2002. Suharto moved the economic policy in a less interventionist direction (although corruption remained rampant), and Indonesia enjoyed strong growth as an exporter of raw materials and, increasingly, light manufactures. The East Asian financial crisis of 1997 became a depression in Indonesia after the government made mistakes in handling a banking and currency crisis, compounded by bad advice from the International Monetary Fund. Riots resulting from the depression led Suharto to resign on 21 May 1998. After a transition, Indonesia had its first democratic elections in 1999. The economy began growing, but at a slower pace than before. Megawati Sukarnoputri, the vice-president and daughter of Sukarno, was elected president by the parliament on 23 July 2001 to succeed her erratic predecessor.



Wars since 1500

Portuguese Wars Against Ternate, 1550-1588 (Ternate was one of the Molucca Islands); Portuguese-Dutch Wars in the East Indies, 1601-1641; Amboina Massacre, 1623 (of 21 English, Japanese, and Portuguese prisoners by the Dutch); Siege of Malacca, 1640-1641 (Netherlands and Acheh against Portugal); First Javanese War of Succession, 1704-1707 (Netherlands and some Javanese kingdoms against other Javanese kingdoms); Second Javanese War of Succession, 1719-1723 (Netherlands and some Javanese kingdoms against other Javanese kingdoms); Javanese-Chinese-Dutch War, 1740-1743; Third Javanese War of Succession, 1749-1757 (Netherlands and some Javanese kingdoms against other Javanese kingdoms); Anglo-Dutch War in Java, 1810-1811; Padri War, 1821-1837; Great Java War, 1825-1830 (Netherlands against Javanese forces); Achinese War, 1873-1907 (Netherlands against Acheh); Second World War in the Pacific, 1942-1945 (Japan against United States, United Kingdom, Netherlands, China, and allies); Indonesian War of Independence, 1945-1949 (Netherlands against Indonesians); Achinese Rebellion of 1953-1959; Indonesian Wars of 1957-1962; Indonesian-Malaysian War of 1963-1966; Indonesian Massacre of 1965 (of suspected Communists); Indonesian War in East Timor, 1975-1999; Civil unrest in Aceh and some other provinces, 1998-present.



Convertibility

In 1830, the government of the Netherlands Indies imposed a tax of 4 percent on the export of silver in an attempt to prevent it from leaving the colony. During the First World War, export of gold and silver was prohibited on 7 August 1914 (by legislation in Netherlands Indies, Staatsblad, No. 543, 1914).

Various quota and licensing arrangements existed in the 1930s, but I have not found good information on the extent of exchange controls.

The Netherlands East Indies introduced exchange controls on 11 May 1940, during the Second World War in Europe (Netherlands Indies, emergency decree [noodverordenung] of 11 May 1940). The Netherlands had introduced exchange controls the previous day.

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

Sabang, in Aceh province, was outside the Indonesian exchange control system as of 1970 even though the Indonesian rupiah was legal tender there.



Other

Defaults on or restructurings of debt to the foreign private sector: None; Indonesia had almost no foreign debt until the East Asian currency crisis of 1997-1998.

Banking crises: De Javasche Bank almost failed in 1841; bank run in 1884 after the failure of the London-based Oriental Bank Corporation, which was a leading bank in eastern and southern Asia (De Javasche Bank and Dutch financiers rescued local banks that experienced problems); some problems in state banks in 1994; out of a total of 240 banks, 61 were closed and 54 were nationalized from 1997-past 1999 as a result of the East Asian currency crisis.

Frankel and Rose (1996) list of currency crashes: 1979, 1983; also East Asian currency crisis, 1997-1998.

Financial stringencies or crises in 1862, 1866 (related to the worldwide crisis of that year), and 1883-1884.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Bányai (1974), Berg (1907), Bree (1928), Cole and Slade (1996), Donnison (1956), Fujita (2003), Handjaja and others (1996), van der Borght (1896), Vissering (1920).

Monetary authorities: Indonesia

Dates Type Name Legal basis Remarks
15 October 1703

-1704

government issue (or quasi government issue) Vereenigde Oost-Indische Compagnie (Dutch East India Company) (headquarters Amsterdam, Netherlands) The Dutch East India Company issued letters of credit, dated 15 October 1703 and no date 1704, that apparently circulated as a kind of paper money. The first coins were issued before 1100.
1704

-1746?

dollarization (no banks) Netherlands guilder Issuance of the letters of credit ceased.
1746?

-26 December 1782

government issue De Bataviasche Bank van Leening / De Bankcourant en Bank van Leening from September 1752 (headquarters for both Batavia, Netherlands Indies [now Jakarta, Indonesia]) The first bank was the majority government-owned De Bataviasche Bank van Leening (headquarters Batavia, Netherlands Indies [now Jakarta, Indonesia]), in Batavia, on 1 December 1746 (Netherlands Indies, ordinance of 26 August 1746). On 1 September 1752, an exchange bank, the Wisselbank, was established in Batavia; by a resolution of 5 September 1752 it was amalgamated with the existing bank as De Bankcourant en Bank van Leening. More detailed regulations were issued in Netherlands Indies, "Ontwerp van de conditiën van een wisselbank of eigenlijk een Bank-courant binnen deze stad, om teffens te dienen tot een Instructie voor de bediendens derzelve," 22 August 1752. De Bataviasche Bank van Leening or its successor issued credit receipts that circulated like paper money.
27 December 1782

-mid August (15 August?) 1794

government issue (or quasi government issue) (another type) Vereenigde Oost-Indische Compagnie (Dutch East India Company) (headquarters Amsterdam, Netherlands) Netherlands Indies, resolution of 2 December 1782 The Dutch East India Company issued full-fledged notes. In 1790, at the time the Bank of Amsterdam was failing, the Bankcourant en Bank van Leening was discovered to be insolvent. It was dissolved on 5 April 1794, although the loan office, the Bank van Leening, continued, first as a government institution and from 1809 as a private one.
mid August (16 August?) 1794

-26 March 1807

dollarization Netherlands guilder Netherlands Indies, announcement of 3 June 1794 The Dutch East India Company retired its the note issue.
27 March 1807

-7 April 1828

government issue Netherlands Indies, Gouvernement General (headquarters Batavia, Netherlands Indies [now Jakarta, Indonesia]) The Bank van Leening issued banknotes during the British occupation of Java, which began in August 1811 and lasted until 1816. However, the issue had no success. In 1817 the Bank van Leening passed into the hands of the Dutch colonial government and all bank bills still in circulation had to be presented by 18 June 1818.
8 April 1828

-31 March 1846

private monopoly issue De Javasche Bank (Bank of Java) (headquarters Batavia, Netherlands Indies [now Jakarta, Indonesia]) Netherlands, Royal

Decree No. 85, 29 December 1826; Netherlands Indies, Decree No. 28, 11 December 1827

A full-fledged, durable bank was established in Batavia (now Jakarta). The second full-fledged bank was the Chartered Bank of India, Australia and China (headquarters London, England), which opened a branch in Batavia (now Jakarta) on 9 November 1863. The government issued large amounts of copper coins rather than issuing notes itself.
1 April 1846

-30 June 1861

private monopoly issue alongside government issue De Javasche Bank (Bank of Java) alongside Netherlands Indies, Gouvernement General (headquarters for both Batavia, Netherlands Indies [now Jakarta, Indonesia]) Netherlands Indies, decree of 4 February 1846 The decree authorized the government to issue notes of up to 500 guilders. The 1-guilder notes replaced copper coins (Netherlands Indies, governor-general's publication of 4 February 1846).
1 July 1861

-March 1942

private monopoly issue De Javasche Bank (Bank of Java) (headquarters Batavia, Netherlands Indies [now Jakarta, Indonesia]) The government also issued notes of 1 to 2.5 guilders from 1919-1920 because of shortages of silver coins at time when the price of silver was high (Netherlands Indies, governor-general's decree No. 1a, 18 July 1919). It did likewise from 1939 until the Japanese invasion of 1942. The 1939 notes were retroactively authorized by Netherlands Indies, Statute Book 1941, No. 118. King (1957: 15) says that the Straits dollar was used in Sumatra until 1908.
March 1942

-31 March 1943

occupation currency alongside private monopoly issue Japanese government (Dai Nippon Tekoku Seihu) (headquarters Tokyo, Japan) alongside De Javasche Bank (Bank of Java) (headquarters Batavia / Jakarta Netherlands Indies [now Indonesia]) The Japanese introduced occupation currency after invading Indonesia during the Second World War. They allowed notes of the Javasche Bank to continue circulating, but froze amount of notes in circulation. The Japanese changed the name of Batavia to Jakarta in 1942 as an attempt to appeal to Indonesian nationalist sentiment. The Dutch continued to refer to the city as Jakarta. In Sumatra, Japanese forces also circulated Japanese military dollars of the type in use in present-day Malaysia and Singapore.
1 April 1943

-October? 1945

occupation currency (issued by joint central bank) alongside private monopoly issue Nampo Kaihatsu Kinko (Southern Development Bank) (headquarters Tokyo, Japan) alongside De Javasche Bank (Bank of Java) (headquarters Batavia / Jakarta Netherlands Indies [now Indonesia]) Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank was the Japanese occupation central bank for southeast Asia. Javasche Bank notes continued to circulate.
October? 1945

-14 December 1951

private monopoly issue alongside government issue and local issues De Javasche Bank (Bank of Java) alongside government of Netherlands Indies / government of Indonesia from December 1949 (headquarters for both Batavia / Jakarta, Netherlands Indies [from December 1949 known as Jakarta, Indonesia]) and various local issuers (see Remarks) (United Kingdom), Supreme Allied Commander, South East Asia, Notice to the People of Java, 30 September? 1945 The Japanese surrender in Java at the end of the Second World War occurred on 9 September 1945. There were nationalist issues from 17 October 1945-26 December 1949, and Dutch colonial government issues taken over from Japanese occupation currency from September 1945-March 1946. The government issues were for up to 500 Netherlands Indies guilders. After the Netherlands recognized Indonesia's independence, the national government issued notes for 5 and 10 Indonesian guilders (Republic of the United States of Indonesia, Emergency Law No. 21, 2 June 1950).
15 December 1951

-30 December 1968

central bank (with commercial banking functions) De Javasche Bank (Bank of Java) / Bank Indonesia from 1 July 1953 / Bank Negara Indonesia Unit I from 19 August 1965 (headquarters for all Jakarta, Indonesia) (Republic of ) Indonesia, Act on the Nationalization of The Java Bank, N.V., No. 24, 6 December 1951; Statute of the Bank Indonesia, Law No. 11, 19 May 1953; Presidential Decree No. 2, 27 July 1965 Indonesia nationalized De Javasche Bank in December 1951. The central banking functions of Bank Indonesia were renamed Bank Negara Indonesia Unit I by the decree of 1965, when all government banks were combined into Bank Negara Indonesia (by Indonesia, Presidential Decree No. l 17, 27 July 1965). Indonesia belonged to the IMF from 15 April 1954-16 August 1965, then quit and rejoined on 21 February 1967.
31 December 1968

-present

central bank Bank Indonesia (headquarters Jakarta, Indonesia) Indonesia, Act Concerning Central Banking, No. 13, December 1968 The central banking functions of Bank Negara became Bank Indonesia, while the commercial banking operation remained with Bank Negara Indonesia.



Monetary authorities: West Irian (Netherlands New Guinea, Irian Barat, Irian Jaya, West Papua)

Dates Type Name Legal basis Remarks
27 December 1949

-29 March 1950

dollarization private monopoly issuer De Javasche Bank [Bank of Java] alongside government issue (government of Indonesia) (headquarters for both Jakarta, Indonesia) Before this period, see Indonesia. Netherlands New Guinea, as it was then called, initially remained a Dutch colony when the rest of present-day Indonesia achieved independence.
30 March 1950

-30 April 1963

government issue government of Netherlands New Guinea (headquarters Hollandia, Netherlands New Guinea [now Jayapura, Indonesia]) The Netherlands established a separate currency to reflect the territory's special political status.
1 May 1963

-17 February 1971

central bank (issuing special local currency, as part of currency union) Bank Indonesia (headquarters Jakarta, Indonesia) Indonesia, Presidential Decree No. 2/1963 Bank Indonesia took over note issue when the territory came under Indonesian control. Bank Indonesia issued a special local currency.
18 February 1971

-present

central bank (as part of currency union) Bank Indonesia (headquarters Jakarta, Indonesia) Indonesia, Presidential Decision No. 8 of 1971 Ceased issuing the special currency, though existing currency continued in circulation until 30 March 1973.



Monetary authorities: Riau archipelago

Dates Type Name Legal basis Remarks
by 1938

-March 1942

dollarization Malayan dollar (issued by currency board Board of Commissioners of Currency, Malaya and British Borneo [headquarters Singapore]) Indonesia, Regulation 44 of 1952 The Riau islands are in the Straits of Malacca and used the Malayan dollar in trade since Dutch colonial times. The 1952 regulation gave official sanction to the practice under the law of the recently consolidated nation of Indonesia.
March 1942

-31 March 1943

occupation currency alongside dollarization Japanese (military) government (headquarters Tokyo, Japan) alongside Board of Commissioners of Currency, Malaya (headquarters Singapore) Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 The Japanese issued occupation currency following their conquest of present-day Indonesia during the Second World War. The decree law of 1942 allowed the continued use of the Malayan dollar. However, Malayan dollars soon went out of circulation because they were hoarded as a more reliable store of value than Japanese military currency. I assume, perhaps incorrectly, that Japanese currency legislation applying to Malaya and Singapore applied to the Riau archipelago.
1 April 1943

-4 September 1945

occupation currency (issued by joint central bank) Nampo Kaihatsu Kinko (Southern Development Bank) (headquarters Tokyo, Japan) Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank, the Japanese occupation central bank for southeast Asia, began issuing notes.
5 September 1945

-14 October 1963

dollarization Malayan dollar (issued by currency board Board of Commissioners of Currency, Malaya and British Borneo [headquarters Singapore / Kuala Lumpur, Malaya (later Malaysia) from July 1962]) Use of Japanese occupation currency ceased following Japan's defeat in the Second World War. I suppose the Riau archipelago's resumption of the use of the Malayan dollar to be the same as in Malaya, which may not be correct.
15 October 1963

-30 June 1964

central bank (issuing special local currency, as part of currency union) Bank Indonesia (headquarters Jakarta, Indonesia) Indonesia, Presidential Decree No. 9/1963 Bank Indonesia issued a special local currency issued to replace the Malayan dollar. The Malayan dollar ceased to be legal tender 1 December 1963.
1 July 1964

-present

central bank (as part of currency union) Bank Indonesia (headquarters Jakarta, Indonesia) Indonesia, Presidential Decree No. 3/1964 Ceased issuing a special currency ceased.



Exchange rate arrangements: Indonesia

Special note: The only good accounts of Indonesia's monetary history in the early years of Dutch rule seem to be in Dutch, a language of which my command is weak. I welcome comments from knowledgeable readers.

Dates Arrangement Legal basis Remarks
1602

-1780s

fixed; used Netherlands silver guilder and other coins The Vereenigde Oost Indische Compagnie (Dutch East India Company) began its colonization of Indonesia in 1602, although colonization was not complete for decades. The Netherlands guilder was a silver-standard currency. Like other colonial governments, the Dutch East India Company from time to time altered the legal tender ratings of various coins, which could vary from their ratings in the Netherlands (see Bree 1928, v. 1: 28-42). Until 1877, copper was often the basis even for large transactions, if silver was not readily available because of government regulations that unwittingly discouraged the circulation of silver coins.
1780s

-25 October 1811

clean? float Locally issued paper money fell to a discount of 23% against silver by 1789.
26 October 1811

-13 January 1817

fixed; 6.5 Netherlands Indies paper rijksdaalders = Spanish silver $1 British governor of Netherlands Indies, proclamation of 11 September 1811 Java was invaded by British forces in 1811. The Spanish silver dollar was worth 64 stuivers or 256 duiten (doits); the stuiver and duiten were Dutch units of account originating from Dutch coins, with 1 Netherlands guilder = 20 Netherlands stuivers = 80 Netherlands duiten. The British issued local silver rupee coins, equal to the Indian rupee, from 1813-1815. They also issued notes denominated in Spanish dollars dated 1 May 1812 and notes denominated in "Java rupees" dated 1814.
14 January 1817

-7 April 1828

officially, hard peg, 1 Netherlands Indies guilder (rupiah) = 9.615g silver = 0.60565g gold = 1 Netherlands guilder; in practice, clean? float Netherlands, decree of 14 January 1817 Officially adopted a local guilder equal to the Netherlands guilder and to 30 Netherlands Indies stuivers or 120 Netherlands Indies duiten. In the Indonesian language it was known as the rupia (whose name comes from the Indian rupee). "Guilder" is gulden in Dutch, meaning "golden." The decree of 14 January 1817 also authorized the issuance of 2 million guilders in government notes and declared that the government should not make any distinction between government notes, silver coins, and copper coins in accepting or making payments. In practice, government notes predominated for larger transactions and copper coins for smaller transactions, and silver coins disappeared from circulation. Netherlands, decree of 28 February 1826, proclaimed the Netherlands guilder to be the standard coin, but in vain.
8 April 1828

-1832

hard peg; 1 Netherlands Indies guilder (rupiah) = 1 Netherlands guilder Netherlands, Royal

Decree No. 85, 29 December 1826; Netherlands Indies, Decree No. 28, 11 December 1827

De Javasche Bank began issuing notes having a hard peg to silver.
1832

-25 March 1846

hard peg; 1 Netherlands Indies guilder (rupiah) = 1 Netherlands guilder = 240g copper Netherlands, decree of 23 August 1832 The Dutch government compelled De Javasche Bank to issue 3 million Netherlands Indies guilders of notes secured by a government deposit of copper. These were in effect government notes issued through the bank as agent. Netherlands Indies, decree of 7 August 1839, ordered 1 million guilders of the copper to be withdrawn.
26 March 1846

-1859

hard peg; 1 Netherlands Indies guilder (rupiah) = 240g copper Netherlands Indies, governor-general's authorization of 26 March 1846 De Javasche Bank was allowed to cease making its notes redeemable in silver, and to make them instead payable in government "receipts" (really just another type of note) that were convertible into copper. One source says that 5 guilders in copper receipts were equal to 6 guilders in copper notes of De Javasche Bank. The duit (doit) was equal to 3g of copper and the stuiver (0.05 guilder) was equal to 6g of copper.
1859

-31 May 1877

hard peg; 1 Netherlands Indies guilder (rupiah) = 1 Netherlands guilder = 9.451g silver = 0.60565g gold Netherlands, Law No. 75, 1 May 1854 The act adopted the silver standard then current in the Netherlands and decimalized the currency. The silver standard came into effect by 1859, because the government had by then redeemed in silver coins all the government receipts mentioned above, which had been denominated in copper. Technically, the Netherlands was bimetallic, but in practice it was on a silver standard, as were most of southern and eastern Asia.
1 June 1877

-4 August 1914

hard peg; 1 Netherlands Indies guilder (rupiah) = 1 Netherlands guilder = 0.6048g gold Netherlands, law of 28 March 1877; Netherlands Indies, ordinance of 1 June 1877 The gold Netherlands 10-guilder piece was introduced as the standard coin, establishing a gold standard. The Netherlands had switched from the silver standard to the gold standard on 6 June 1875. Netherlands Indies, Law No. 610, 31 October 1912, established a direct parity into gold for the Netherlands Indies guilder.
5 August 1914

31 May 1926

hard peg; 1 Netherlands Indies guilder (rupiah) = 1 Netherlands guilder Netherlands Indies, governor-general's decree of 5 August 1914 Notes of De Javasche Bank were made forced tender during the First World War for the duration of the war.
1 June 1926

-25 September 1936

hard peg; 1 Netherlands Indies guilder (rupiah) = 1 Netherlands guilder = 0.6048g gold Netherlands Indies, Overeenkomst met De Javasche Bank voor de overmaking tegen parikoers van gelde ten behoeve van den Lande tusschen Nederland en Nederlandsch-Indië en omgekeerd, Decree No. 3x, 29 June 1926 Convertibility into gold resumed some years after the end of the First World War.
26 September 1936

-14 May 1940

hard peg; 1 Netherlands Indies guilder (rupiah) = 1 Netherlands guilder The Netherlands abandoned the gold standard on 26 September 1936. It was of the last countries to do so in the worldwide depression that had begun in 1929. The Netherlands Indies followed. From this point forward the gold parity was inoperative even though it remained on the books, so the second column no longer lists it.
15 May 1940

-24 May 1940

hard peg; 1.88 Netherlands Indies guilder (rupiah) = US$1 Netherlands Indies, government announcement of 15 May 1940 After the Netherlands was invaded by Germany on 10 May 1940, during the Second World War, the Netherlands Indies remained loyal to the free Dutch government in exile in London. At first, the Netherlands Indies switched its anchor currency to the US dollar at the cross rate with the Netherlands guilder prevailing before the German invasion.
25 May 1940

-March 1942

hard peg; 7.60 Netherlands Indies guilder = UK£1 De Javasche Bank (Bank of Java) and Bank of England, provisional agreement of 25 May 1940; United Kingdom and Netherlands Indies, Monetary Agreement (Monetair Accord), 14 July 1940 Switched to the pound sterling as the anchor currency at the prevailing cross rate with the US dollar. This action ended the market in "free sterling" that had existed since 1939. The free sterling rate had been about 6.30 Netherlands guilders = UK£1 on 9 May 1940, just before the German invasion of the Netherlands.
March 1942

-31 March 1943

hard peg; 1 Netherlands Indies guilder = 1 Japanese military guilder (= 1 Japanese yen) The Japanese introduced a military guilder after conquering Indonesia during the Second World War. Convertibility into Japanese yen was restricted. Notes of the Javasche Bank continued to be legal. In Sumatra, Japanese forces also circulated Japanese military dollars of the type in use in present-day Malaysia and Singapore. The exchange rate was 1 Japanese military dollar = 1 Japanese military guilder. The prewar exchange rate had been about 2.3 Japanese yen = 1 Netherlands Indies guilder.
1 April 1943

-October? 1945

hard peg; 1 Netherlands Indies guilder = 1 Southern Development Bank guilder (= 1 Japanese yen) Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Singapore-based Southern Development Bank, a Japanese occupation central bank for present-day Brunei, Burma, Indonesia, Malaysia, Philippines, and Singapore, replaced the Japanese military as the issuer of currency. Convertibility into Japanese yen remained restricted. Notes of the Javasche Bank continued to be legal. Until near the end of the war, Japanese occupation currency was accepted as equal to or at one point even at a premium to Javasche Bank currency in the black market. Toward the end of the war, occupation currency fell to 3-4 occupation guilders per Javasche Bank-issued guilder.
October? 1945

-6 March 1946

hard peg; 7.60 Netherlands Indies guilder = UK£1, or 1 Netherlands Indies guilder = 1 Netherlands guilder (United Kingdom), Supreme Allied Commander, South East Asia, Notice to the People of Java, 30 September? 1945 The British military temporarily administered Indonesia after Japan surrendered to end the Second World War. They re-established the pound sterling as the interim anchor currency. Indonesian nationalists also issued local currencies, which in practice had floating exchange rates. The Netherlands guilder had been devalued to 10.691 Netherlands guilders = UK£1, so the exchange rate of the Netherlands Indies guilder against the pound sterling was a broken cross-rate.
7 March 1946

-1 November 1949

hard peg; 1 Netherlands Indies guilder = 1 Netherlands guilder The Netherlands re-established its guilder as the anchor currency following the resumption of Dutch rule. Indonesian nationalists continued to issue local currencies, which in practice had floating exchange rates. Early in 1946, perhaps in the first part of this period, there was a short break from the parity of the Netherlands Indies guilder with the Netherlands guilder; the exchange rate reached as much as 1.40 Netherlands Indies guilder = 1 Netherlands guilder. After the Netherlands guilder was devalued on 20 September 1949, following the devaluation of the pound sterling on 18 November 1949, the gold parity was in reality 4,276.04 Netherlands Indies guilders = 1kg gold even though the parity established in 1912 remained on the books.
2 November 1949

-12 March 1950

hard peg; 1 Indonesian rupiah = 1 Netherlands guilder By the start of this period, Indonesian nationalists controlled most of the country. They renamed the currency the rupiah (previously its informal Indonesian name, from the Indonesian word for "rupee") as a sign of Indonesia's independence struggle, though it also continued to be called the guilder in some contexts. Indonesia, Currency Law 1951, Emergency Law No. 20, 27 September 1951, decreed that upon publication, the currency of Indonesia would be the rupiah.

RR: Managed float to December 1949, then a gap in coverage.

13 March 1950

-3 February 1952

hard peg, dual rate; official rate 3.80 Indonesian rupiah = US$1 Indonesia, Foreign Exchange Control Institute (Lembaga Alat-Alat Pembajaran Luar Negeri), Publication "A" No. 26, 11 March 1950 In effect switched to the US dollar as anchor currency at the prevailing cross rate and, by the foreign exchange control regulations cited, introduced a system of foreign-exchange certificates that amounted to a dual exchange rate. Indonesia never registered a gold parity with the IMF. A currency confiscation occurred on 19 March 1950. Notes in amounts exceeding 62.50 Indonesian rupiah were exchanged, half for new currency at one-to-one, and half for government bonds. Also, half of bank deposits above 200 Indonesian rupiah were forcibly converted into government bonds. Nationalist note issues from the independence struggle were converted into Indonesian rupiah at varying rates for up to 50 Indonesian rupiah; amounts above this were converted into deposits at the government-owned Bank Negara Indonesia. The exchange of nationalist note issues occurred from 30 March-1 June 1950 (United States of Indonesia, Minster of Finance, Decree No. P.U. 1, 19 March 1950).

RR: A gap in coverage to September 1950. Freely falling / managed float from October 1950.

4 February 1952

-24 August 1959

hard peg, multiple rates; official rate 11.40 Indonesian rupiah = US$1 Indonesia, Emergency Law No. 3, 2 February 1956; Foreign Exchange Control Institute (Lumbago Alat-Alat Pembajaran Luar Negeri), Publication "A" No. 39, 4 February? 1952; De Javasche Bank (Bank of Java) , foreign exchange rates bulletin, 4 February 1952 Devalued, and replaced foreign-exchange certificates with a new scheme of multiple exchange rates.

RR: Managed float to August 1954. Freely falling / managed float September 1954-November 1955. Managed float from December 1955.

25 August 1959

-12 December 1965

hard peg, multiple rates; official rate 45 Indonesian rupiah = US$1 Indonesia, Government Regulation No. 43, 25 August 1959 Devalued and undertook a currency confiscation. The two main provisions of the confiscation were that holders of 500- and 1,000-rupiah notes had 90% of the value of the notes confiscated (they received back 50- and 100-rupiah notes), and that 90% of deposits above 25,000 rupiah were forcibly converted into loans to the government (Indonesia, Government Regulation Substituting an Act No. 2 [regarding notes] and No. 3 [regarding deposits], both 25? August 1959). The "basic [exchange] rate" of the rupiah, later termed the "transaction rate," was 315 Indonesian rupiah = US$1 as of 27 May 1963 (Indonesia, regulations of 22 May 1963) and 250 Indonesian rupiah = US$1 as of 17 April 1964 (Indonesia, regulations of 27 March 1964).

RR: Managed float. Parallel market premium was 2,678% July 1962, 5,100% August 1965 and peaked at 11,100% November 1965.

13 December 1965

-20 December 1965

soft peg, multiple rates; official rate 0.25 new Indonesian rupiah = US$1 Indonesia, Presidential Decree No. 27/1965 Introduced a new currency at 1 new Indonesian rupiah = 1,000 old Indonesian rupiah and imposed another currency confiscation. The confiscation took the form of a 10% tax on all exchanges of new rupiah for old (Indonesia, Decision of Dwikora Cabinet Presidium No. Aa/D/144/1965, December 1965).

RR: Managed float.

21 December 1965

-10 February 1966

soft peg, multiple rates; official rate 0.25 new Indonesian rupiah = US$1, effective rate 10 new Indonesian rupiah = US$1 Indonesia, Presidential Decree No. 20/1965, December 1965 Added a subsidy for exports and a surcharge for exports of 9.75 Indonesian rupiah per US dollar. This was a period of great political turmoil in Indonesia.

RR: Managed float.

11 February 1966

-16 April 1970

managed float, multiple rates; official rate 0.25 new Indonesian rupiah = US$1, effective rate 10 new Indonesian rupiah = US$1 (neither one used; see Remarks) Indonesia, Presidential Decree No. 4, 11 February 1966; Directive of the Cabinet Presidium No. 48/Kep/10/1966, 3 October 1966 Created two main rates in this period: the Bonus Export (BE) rate, in February 1966, and the Complementary Foreign Exchange (Devisa Pelengkap, or DP) rate, in October 1966. The official and effective rates were no longer used. Indonesia quit the IMF on 17 August 1965 and rejoined on 21 February 1967, to there is a gap in IMF information for 1966.

RR: Managed float to March 1969. In February 1967 parallel market premium was in single digits for first time. De facto crawling band of +/-5% to US dollar from April 1969.

17 April 1970

-22 August 1971

soft peg, dual rate; official rate 378 Indonesian rupiah = US$1 Indonesia, Government Regulation No. 16/1970, 17 April 1970 In principle the main rate could fluctuate; the second exchange rate of 326 Indonesian rupiah = US$1 was for foreign aid funds. On 9 December 1970 Indonesia unified the exchange rate, but a 10% exchange tax continued to apply to most commodity exports, so both the IMF and I continue to classify the exchange rate as a dual rate. the Indonesia government closed the foreign-excange market on 18 August 1971 and allowed it to resume on 23 August 1971.

RR: De facto crawling band of +/-5% to US dollar to 9 December 1970. Peg to US dollar from 10 December 1970.

23 August 1971

-11 June 1974

hard peg, dual rate; official rate 415 Indonesian rupiah = US$1 Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Indonesia never registered a gold parity with the IMF. Indonesia used the opportunity created by these events to devalue.

RR: De facto crawling band of +/-5% to US dollar to June 1972. Freely falling / de facto crawling band of +/-5% to US dollar from July 1972.

12 June 1974

-15 November 1978

hard peg; official rate 415 Indonesian rupiah = US$1 Replaced the second exchange rate with an export tax.

RR: De facto crawling band of +/-5% to US dollar.

16 November 1978

-29 March 1983

basket (IMF: managed float) Indonesia, Minister of Finance, announcement of 15 November 1978 Devalued to 625 Indonesian rupiah = US$1 initially and switched the anchor to a currency basket, which however was only part of the mix determining exchange rate policy.

RR: De facto crawling peg to US dollar. Parallel market premium consistently below 20% and mostly in single digits.

30 March 1983

-12 June 1996

managed float The exchange rate against the US dollar was depreciated by 27.6%, to 970 Indonesian rupiah = US$1, on 30 March 1983, and the basket was broadened to include more currencies. On 12 September 1986 the exchange rate was depreciated from 1,134 Indonesian rupiah = US$1 to 1,664 Indonesian rupiah = US$1.

RR: De facto crawling peg to US dollar. Parallel market premium consistently below 20% and mostly in single digits.

13 June 1996

-9 September 1996

in practice, band of 5% with US dollar (IMF: managed float) Widened the band from its previous width of 2%.

RR: De facto crawling peg to US dollar. Parallel market premium consistently below 20% and mostly in single digits.

10 September 1996

-10 July 1997

in practice, band of 8% with US dollar (IMF: managed float) Widened the band further.

RR: De facto crawling peg to US dollar. Parallel market premium consistently below 20% and mostly in single digits.

11 July 1997

-13 August 1997

in practice, band of 12% with US dollar (IMF: managed float) Widened the band still further, nine days after the East Asian currency crisis began.

RR: De facto crawling peg to US dollar. Parallel market premium consistently below 20% and mostly in single digits.

14 August 1997

-27 February 1998

managed float (IMF: independent float) Ended the band as a precautionary measure during the East Asian currency crisis.

RR: Freely falling / freely floating.

28 February 1998

-1999

managed float, dual rate (IMF: independent float) Introduced a subsidized rate for food imports during the East Asian currency crisis. The main rate was depreciating fast and gyrating wildly.

RR: Freely falling / freely floating to March 1999. Freely floating March 1999-December 2001.

1999

-present

managed float (IMF: independent float, reclassified as managed float 30 June 2001) The dual exchange rate ended on a date in 1999 not specified by the IMF source or other sources I have seen.

RR: Freely falling / freely floating to March 1999. Freely floating March 1999-December 2001.



Exchange rate arrangements: West Irian (Netherlands New Guinea, Irian Barat, Irian Jaya, West Papua)

Dates Arrangement Legal basis Remarks
27 December 1949

-29 March 1950

fixed; used Indonesian rupiah Before this period, see Indonesia. Netherlands New Guinea, as it was then called, initially remained a Dutch colony when the rest of present-day Indonesia achieved independence.
30 March 1950

-30 April 1963

hard peg; 1 Netherlands New Guinea guilder = 1 Netherlands guilder The Netherlands established a separate currency to reflect the territory's special political status. The Netherlands New Guinea guilder was a decimal currency.
1 May 1963

-26 May 1963

hard peg; 1 Irian Barat rupiah = 1 Netherlands guilder = 12.43 Indonesian rupiah Indonesia, Presidential Decree No. 2/1963, 1963 Bank Indonesia took over note issue when the territory came under Indonesian control, issuing a special local currency. The name of the region was changed from Netherlands New Guinea to Irian Barat (West Irian).
27 May 1963

-30 September 1963

hard peg, dual rate; effective rate 1 Irian Barat rupiah = 87.01 Indonesian rupiah Indonesia introduced an exchange rate subsidy.
1 October 1963

-12 December 1965

hard peg, dual rate; effective rate 1 Irian Barat rupiah = 140.12 Indonesian rupiah Indonesia allowed an additional exchange rate subsidy, resulting in this effective rate.
13 December 1965

-2 April 1967

hard peg, dual rate; official rate 1 Irian Barat rupiah = 0.14012 Indonesian rupiah = US$0.2762 Indonesia introduced a new rupiah at 1 new Indonesian rupiah = 1,000 old Indonesian rupiah.
3 April 1967

-16 April 1970

hard peg; official rate 1 Irian Barat rupiah = 10 Indonesian rupiah, or 10 Irian Barat rupiah = US$1 The Indonesian rupiah was depreciating.
17 April 1970

-17 February 1971

hard peg, dual rate; official rate 1 Irian Barat rupiah = 18.90 Indonesian rupiah, or 20 Irian Barat rupiah = US$1 (see Remarks) Indonesia removed restrictions on importing and exporting Irian Barat and Indonesian banknotes. The rate for the US dollar in principle fluctuated, mirroring the similar rate of the Indonesian rupiah. Indonesia, Presidential Decision No. 8 of 1971, effective 18 February 1971, introduced the Indonesian rupiah as legal tender alongside the Irian Barat rupiah at 18.90 Indonesian rupiah = 1 Irian Barat rupiah.
23 August 1971

-30 March 1973

hard peg, dual rate; official rate 1 Irian Barat rupiah = 18.90 Indonesian rupiah, or 21.96 Irian Barat rupiah = US$1 Devalued the US dollar rate in line with the Indonesian rupiah's devaluation of 23 August 1971.
1 April 1973

-present

fixed (as part of currency union); uses Indonesian rupiah The Indonesian rupiah became sole legal tender.



Exchange rate arrangements: Riau archipelago
Dates Arrangement Legal basis Remarks
by 1938

-22 February 1942

fixed; used Malayan dollar Indonesia, Government Regulation No. 44/1952 The Riau islands are in Straits of Malacca and had long used the Malayan dollar in trade unofficially. The Malayan dollar was a decimal currency.
23 February 1942

-31 March 1943

hard peg; 1 Japanese military dollar = 1 Japanese yen = Malayan $1 In Sumatra, Japanese forces circulated Japanese military dollars of the type in use in present-day Malaysia and Singapore. The exchange rate was 1 Japanese military dollar = 1 Japanese military guilder of the type used elsewhere in Indonesia. The prewar exchange rate had been about 2 Japanese yen = Malayan $1. I assume that in the Riau archipelago, Japanese military dollars rather than military guilders predominated. I assume, perhaps incorrectly, that Japanese currency legislation applying to Malaya and Singapore applied to the Riau archipelago.
1 April 1943

-4 September 1945

hard peg; Southern Development Bank $1= = 1 Japanese yen Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank, the Japanese occupation central bank for southeast Asia, began issuing notes. On the black market, the Southern Development Bank dollar depreciated rapidly against the still-hoarded Malayan dollar, to which it remained officially equal.
5 September 1945

-14 October 1963

fixed; used Malayan dollar Use of Japanese occupation currency ceased following Japan's defeat in the Second World War. I am dating the Riau archipelago's resumption of the use of the Malayan dollar as being the same as in Malaya, which may not be correct.
15 October 1963

-30 June 1964

hard peg, dual rate; 1 Kepulauan Riau rupiah = Malayan $1 = 14.70 Indonesian rupiah Indonesia, Presidential Decree No. 9/1963 Bank Indonesia issued a special local currency to replace the Malayan dollar. The effective exchange rate was 1 Kepulauan Riau rupiah = 164.17 Indonesian rupiah. The Malayan dollar ceased to be legal tender on 1 December 1963.
1 July 1964

-present

fixed (as part of currency union); uses Indonesian rupiah Indonesia, Presidential Decree No. 3/1964 The issue of special currency ended. The Indonesian rupiah was introduced at 1 Kepulauan Riau rupiah = 14.70 Indonesian rupiah.



Iran



Political sketch

Called Persia until 1935.

The Safavid dynasty (1502-1736) was followed by frequent internal conflict. By 1779 the Qajars had established their rule, but European politics intervened and affected the future of Iran. The United Kingdom perceived a threat to its empire in India from Russia's southward push. The two nations engaged in trade and diplomatic rivalry in Iran, turning it into a semicolonial state that was economically controlled by the two European powers. Riots broke out at the turn of the 20th century in protest of the rule of the Qajar monarch. His son was forced to convene a national assembly (the Majles) and to grant a constitution in 1906. Oil, still Iran's biggest export today (2004), was discovered in 1908. In the famine and bankruptcy that followed the First World War, a coup in 1921 brought Reza Khan to power. In 1925 he deposed the last Qajar ruler and declared himself shah (styled Reza Shah Pahlavi). His collaboration with Nazi Germany in 1941 led to his abdication on 16 September 1941 and the assumption of power by his son, Mohammad Reza Shah Pahlavi. In November 1945 a communist-led revolt against the central government led to the formation of an autonomous, Soviet-backed state of (Iranian) Azerbaijan. Iran reoccupied the region on 11 December 1946.

The early years of the younger Pahlavi were marked by a struggle for power against elected politicians, who nationalized the oil industry in March 1951. In August 1953 the shah overthrew prime minister Mohammed Mossadeq (also spelled Mossadegh). The United Kingdom and United States supported the shah because they feared Mossadeq was too friendly toward the Union of Soviet Socialist Republics. Iran's growing oil revenue enabled him to embark on an expensive modernization program. However, modernization alienated many of the country's religious leaders, whose power he restricted. The shah was also resented for his extravagant spending and political repression. Demonstrations against him occurred in the 1970s, and on 16 January 1979 his government collapsed and he fled the country. Ruhollah Khomeini, a Shiite Muslim ayatollah in exile in Paris, returned to lead the movement that set up an Islamic republic on 1 April 1979. After the revolution, fundamentalist Muslim codes were enacted and Western influence in Iran was suppressed. In September 1980 Iraq launched a military invasion of Iran, with devastating effects on the economies of both countries. The Iran-Iraq War became a bloody and expensive stalemate, resulting in numerous casualties. A cease-fire was signed in August 1988. After the death of Khomeini in 3 June 1989 and the end of the war in 1990, Iran tended to lessen its international isolation. However, Iran remained a prominent sponsor of Islamic terrorism, even against other Islamic countries. Tension exists between the oligarchic vision of religious leaders and the desire of many Iranians for more democratic government. Iran's economy has made little progress since the overthrow of the shah.



Wars since 1500

Persian Civil War of 1500-1513; Turko-Persian War of 1514-1516; Turko-Persian War of 1526-1555; Turko-Persian War of 1578-1590; Turko-Persian War of 1603-1612; Turko-Persian War of 1616-1618; Mogul-Persian War of 1622-1623; Turko-Persian War of 1623-1638; Wars of Aurangzeb, 1636-1657; Mogul-Persian War of 1638; Mogul-Persian War of 1649-1653; Russo-Persian War of 1722-1723; Persian Civil War of 1725-1730; Persian-Afghan War of 1726-1738; Turko-Persian War of 1730-1736; Persian Invasion of Mogul India, 1738-1739; Turko-Persian War of 1743-1747; Persian Civil War of 1747-1760; Persian Civil War of 1779-1794; Persian-Afghan War of 1798; Russo-Persian War of 1804-1813; Persian-Afghan War of 1816; Turko-Persian War of 1821-1823; Russo-Persian War of 1825-1828; Persian-Afghan War of 1855-1857; Anglo-Persian War of 1856-1857; Persian Revolution of 1906-1909; Russo-Persian War of 1911; Soviet Invasion of Northern Persia, 1920; Persian Revolution of 1921; Kurdish Rebellion, 1930; Second World War in the Middle East, 1941 (United Kingdom against Germany and Vichy France); Kurdish Mahabad Republic, 1945-1946; Iranian Revolution of 1979; Iran-Iraq War of 1980-1988.



Convertibility

Foreign exchange controls were imposed in February 1930. They were extended in 1 March 1933 (Persia, Foreign Exchange Bill, 1 March 1933); an act of 4 March 1943 and definitively ended convertibility of notes into silver.



Other

Defaults on or restructurings of debt to the foreign private sector: 1992.

Banking crises: None listed, but given Iran's history it is unlikely that none have ever happened.

Frankel and Rose (1996) list of currency crashes: None.

In November 1945 a communist-led revolt against the central government led to the formation of an autonomous state of (Iranian) Azerbaijan, which was proclaimed on 15 December 1945. During the region's period of independence it issued its own notes. The region was reoccupied by Iran on 11 December 1946.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Anan'ich (1975), Anonymous (1962), Jones (1986).

Monetary authorities: Iran

Dates Type Name Legal basis Remarks
September or October 1294 government issue government of Persia (headquarters Tabriz, Persia) ruler's decree Issuance of notes known as "chaw" for about two months under the ruler Kai Khatu (also spelled Gaykhatu) ended in riots and the assassination of the minister who had proposed the scheme. The first coins were issued around 330 BC.
late 1294

-August 1888

coins only Notes were not issued again for hundreds of years.
August 1888

-December 1889

private, de facto monopoly issue New Oriental Bank (headquarters London, England) United Kingdom, incorporation registration of New Oriental Bank, 1884 The New Oriental Bank issued bearer bills that circulated like notes. It opened branches in Tehran, Tabriz, Isfahan, and other cities. The bank did not have an official monopoly of note issuance, but no other note issuers existed during this brief period.
December 1889

-March 1932

central bank (with commercial banking functions; private ownership) Imperial Bank of Persia or Bank e-Shahi (headquarters London, England) Persia, Concession of the Imperial Bank of Persia, 30 January 1889; United Kingdom, royal charter of the Imperial Bank of Persia, 2 September 1889 The Imperial Bank of Persia was mainly British owned; it was later called the British Bank of the Middle East. The Imperial Bank of Persia bought the Persian assets of the New Oriental Bank, including its note issue, in April 1890. It first issued its own notes about May 1890. The concession granted by the Persian government gave the bank a monopoly of note issuance. The second competing bank was the Russian-backed Société des Prêts or Banque des Prêts de Perse (Persian Loan Bank, also called the Discount and Loan Bank) (headquarters Tehran, Persia [now Iran]), in 1890.
March 1932

-27 May 1960

central bank (with commercial banking functions) Bnk-i Milli rn (Bank Melli Iran or National Bank of Iran) (headquarters Teheran, Iran) Persia, Bank Melli Act, April 1927; Appendix No. 5 to Concession of the Imperial Bank of Persia, 13 May 1930 Bank Melli opened on 8 September 1928. The government created it to compete with the Imperial Bank of Persia as a commercial bank. The renegotiated the concession of the Imperial Bank of Persia stripped that bank of its note issue. The Imperial Bank of Persia began withdrawing its notes on 21 June 1932 and finished on 20 September 1932 (at the end of the Iranian calendar year). The note issues of Bank Melli initially had a gold reserve requirement of 60%. Iran joined the IMF on 29 December 1945, as an original member.
28 May 1960

-present

central bank Bnk-i Markaz-i rn (Central Bank of Iran) / Bnk-i Markaz-i Jumhr-i Islm-i rn (Bank Markazi Joumhouri Islami Iran or Central Bank of the Islamic Republic of Iran) from 21 March 1982? (headquarters for both Teheran, Iran) Iran, Monetary and Banking Law of Iran, 28 May 1960 Separated the central banking functions of Bank Melli Iran from its commercial banking functions. Iran nationalized all banks on 7 June 1979, following the Islamic revolution.



Exchange rate arrangements: Iran

Dates Arrangement Legal basis Remarks
1857

-28 February 1930

hard peg; 1 Persian kran = 4.1427g silver Before this the kran (also transliterated qiran) had been debased by successive governments. Starting in 1890 the Imperial Bank of Persia issued notes denominated in tomans, one toman being equal to ten krans. "Toman" comes from the Persian word for "ten thousand," because a toman was nominally worth 10,000 dinars.
1 March 1930

-21 March 1932

hard peg; legal rate 59.75 Persian krans = UK£1; official buying rate fluctuated Shortly before, the market rate had been about 70 Persian krans = UK£1. Persia, law of 18 March 1930, established a nominal exchange rate of 1 Persian kran = 0.3661191g gold, but the law does not seem to have been in effect, and after the United Kingdom abandoned the gold standard on 21 September 1931, Persia decided not to execute the portions of the law concerned with the gold standard at this time.
22 March 1932

-21 March 1933

hard peg; legal rate 59.750 Persian rials = UK£1; official buying rate fluctuated Decimalized the currency and changed its name; 1 Persian rial = 1 Persian kran. The rial was divided into 1,000 dinars. "Rial" derives from the Spanish real ("royal") coin, also known as the Spanish silver dollar, peso, piastre, or piece of eight. The official buying rate averaged 103 rials per pound sterling in 1933 (Jones 1986: 360).

RR: Parallel market.

22 March 1933

-21 March 1935

hard peg; legal rate 59.750 Persian rials = UK£1, or 1 Persian rial = 0.07322382g gold (nominally); official buying rate fluctuated Persia, law of 18 March 1930 A gold parity for the currency came into effect but was inoperative in practice.
22 March 1935

-2 March 1936

hard peg; legal rate 59.750 Iranian rials = UK£1, or 1 Iranian rial = 0.07322382g gold (nominally); official buying rate fluctuated Persia was renamed Iran at the start of the period (the first day of the Persian calendar year 1311).

RR: Parallel market.

3 March 1936

-20 December 1939

hard peg; 80.25 Iranian rials = UK£1, or 1 Iranian rial = 0.07322382g gold (nominally) A Foreign Exchange Commission began operations (by Iran, law of 1 March 1936) and exercised tighter effective control in the foreign exchange market than the government previously had. The official and market rates were close henceforth. The dealing spread of Bank Melli Iran was 80-80.50 Iranian rials = UK£1.
21 December 1939

-16 August? 1940

hard peg; 64.350 Iranian rials = UK£1, or 1 Iranian rial = 0.07322382g gold (nominally) Revalued after the Second World War broke out in Europe

RR: Parallel market.

17 August? 1940

-30 September 1941

hard peg; 68.800 Iranian rials = UK£1, or 1 Iranian rial = 0.07322382g gold (nominally) Devalued. The market rate did not really change.

RR: Parallel market.

1 October 1941

-13 May 1942

hard peg; 141 Iranian rials = UK£1, or 1 Iranian rial = 0.07322382g gold (nominally) The Allied powers of the Second World War demanded a devaluation of the official rate of the rial to correct what they viewed as its overvaluation. The buying rate was 140 Iranian rials = UK£1, while the selling rate was 142 Iranian rials = UK£1.

RR: Parallel market.

14 May 1942

-18 November 1942

hard peg; 129 Iranian rials = UK£1, or 1 Iranian rial = 0.07322382g gold (nominally) Iran and United Kingdom, Financial Agreement, 26 May 1942 Allied wartime spending in Iran strengthened the rial. The agreement set buying rates of 128 Iranian rials = UK£1and 32 rials = US$1, and selling rates of 130 Iranian rials = UK£1and 32.50 Iranian rials = US$1.

RR: Parallel market.

19 November 1942

-28 December? 1945

hard peg; 129 Iranian rials = UK£1, or 1 Iranian rial = 0.02741g gold (nominally) Established a new gold parity, which however remained inoperative in practice.
29 December? 1945

-17 December 1946

hard peg, dual rate; official rate 32.250 Iranian rials = US$1, or 1 Iranian rial = 0.02741g gold (nominally) Switched to the US dollar as the anchor currency at the prevailing cross rate with the pound sterling. I have placed this at the date Iran joined the IMF, but it is just a guess. The switch reflected increasing US political influence in the Middle East and the status of the US dollar as world's new main anchor currency. Iran also introduced a second exchange rate of 49.34 Iranian rials = US$1 for 90% of export receipts and for so-called nonessential imports.

RR: Dual market.

18 December 1946

-23 July 1950

hard peg, dual rate; official rate 32.250 Iranian rials = US$1, or 1 Iranian rial = 0.275557g gold Iran registered a gold parity with the IMF. The parity was a slight revaluation from the previous, inoperative parity.

RR: Dual market.

24 July 1950

-21 May 1957

hard peg, multiple rates; official rate 32.250 Iranian rials = US$1, or 1 Iranian rial = 0.275557g gold perhaps Iran, Decree No. 7133, 25 July 1950 Introduced another, more depreciated exchange rate as part of a partial exchange rate liberalization.

RR: Dual market to January 1954. De facto band of +/-2% around US dollar / dual market from February 1954.

22 May 1957

-15 August 1971

hard peg; 75.750 Iranian rials = US$1, or 1 Iranian rial = 0.0117316g gold Iran, Note Reserves (Amendment) Act, 18 May 1957 Devalued and unified the exchange rate. The previous official exchange rate had been inoperative for a few years.
16 August 1971

-6 September 1972

hard peg; 75.750 Iranian rials = US$1, or 1 Iranian rial = 0.0117316g gold (nominally) no action by Iran Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Iran did not follow the devaluation of the US dollar against gold on 18 December 1971, but neither did it revalue against the US dollar.
7 September 1972

-14 February 1973

hard peg; 75.750 Iranian rials = US$1, or 1 Iranian rial = 0.0108055g gold (nominally) This devaluation against gold belatedly followed the US devaluation of 18 December 1971.
15 February 1973

-9 January 1974

hard peg; 68.725 Iranian rials = US$1, or 1 Iranian rial = 0.0108055g gold (nominally) Did not follow the devaluation of the US dollar on 13 February 1973. Iran adopted wider margins. There was an oil boom in this period in Iran, and the revaluation against the US dollar helped reduce inflation. The IMF source lists the exchange rate as 68.1747 Iranian rials = US$1, as opposed to the slightly different rate listed in central bank reports and here.
10 January 1974

-11 February 1975

hard peg, dual rate; 68.725 Iranian rials = US$1, or 1 Iranian rial = 0.0108055g gold (nominally) Introduced a dual rate as part of a liberalization of exchange controls that took effect from 10-14 January 1974.

RR: De facto band of +/-2% around US dollar from 14 January 1974.

12 February 1975

-31 March 1978

hard peg, dual rate; 82.2425 Iranian rials = 1 SDR, or 1 Iranian rial = 0.0108055g gold (nominally) Central Bank of Iran, decree of 12? February 1975 Switched to the SDR as the anchor currency, at the prevailing cross rate with the US dollar.

RR: De facto band of +/-2% around US dollar from 14 January 1974 to December 1976. Managed float / parallel market from January 1977.

1 April 1978

-21 July 1978

band, dual rate; 82.2425 Iranian rials +/-7.5% = 1 SDR International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members. Also on this date, Iran widened its margins of fluctuation.

RR: Managed float / parallel market.

22 July 1978

-21 May 1980

managed float (target zone), dual rate Ceased maintaining specific margins of fluctuation.

RR: Managed float / parallel market.

22 May 1980

-18 December 1984

hard peg, multiple rates; 92.300 Iranian rials = 1 SDR a background regulation was Central Bank of Iran, Circular No. EX/16540, 4 December 1979

Pegged to the SDR after the United States froze Iranian assets in November 1979 following a storming of the US embassy in Tehran and hostage-taking of US citizens there by Iranian "students." Central bank reports initially list an exchange rate of 92.2984 Iranian rials = 1 SDR, but later imply that the rate listed in the first column was in effect the whole time. The IMF source does not list multiple rates until 1981, but they seem to have been in effect since 1980. There was a special exchange rates for nonoil exports and a rate of 150 Iranian rials = US$1 for Iranians living in the Persian Gulf region remitting earnings.

RR: Managed float / parallel market.

19 December 1984

-7 October 1989

hard peg; 92.300 Iranian rials = 1 SDR Unified the exchange rate. In place of preferential exchange rates, nonoil exporters received cash bonuses in Iranian rials, or were permitted to use export proceeds to buy imports rather than having to give the proceeds to the government.

RR: Managed float. From January 1987, parallel market premium was consistently above 1,000%.

8 October 1989

-6 December 1989

hard peg, dual rate; official rate 92.300 Iranian rials = 1 SDR Introduced a "preferential competitive" rate, initially 1,000 Iranian rials = US$1.

RR: Managed float / parallel market.

7 December 1989

-20 March 1993

hard peg, multiple rates; official rate 92.300 Iranian rials = 1 SDR Introduced a "service" rate, initially 845 Iranian rials = US$1.

RR: Managed float / parallel market. Parallel market peaks at 3,618% February 1993.

21 March 1993

-3 May 1994

managed float (IMF: independent float) Unified the exchange rate at the start the Iranian calendar year. The official rate, called the "floating" rate, was in practice pegged at around 1,750 Iranian rials = US$1 from December 1993.

RR: Managed float / parallel market to January 1994. Parallel market premium settles around 50%. Freely falling / managed float / parallel market from February 1994.

4 May 1994

-20 March 2000

hard peg, multiple rates; official rate 1,750 Iranian rials = US$1 (IMF: independent float, reclassified as managed float 1995, reclassified as hard peg 1998) Introduced an export rate of 2,345 Iranian rials = US$1 and two other exchange rates on this date, or perhaps earlier.

RR: Freely falling / managed float / parallel market to February 1996. Managed float from March 1996. Parallel market premium consistently above 150% March 1996-December 2001 and occasionally above 200%.

21 March 2000

-20 March 2002

hard peg, dual rate; official rate 1,750 Iranian rials = US$1 Abolished the third exchange rate.

RR: Managed float to December 2001, when data end. Parallel market premium consistently above 150% March 1996-December 2001 and occasionally above 200%.

21 March 2002

-present

managed float Floated and unified the exchange rate.



Iraq



Political sketch

Formerly Mesopotamia. Independent from the United Kingdom on 3 October 1932.

Iraq was home to one of the world's first urban, literate civilizations: Sumer, which arose as early as 3500 BC. In the 700s Baghdad became the capital of the 'Abbasid caliphate and the center of the Muslim world, until both were destroyed by the Mongols in 1258. The Ottomans took control of Iraq in the 1500s and held it until 1917. Under Ottoman rule Iraq experienced frequent insurrections from within and invasions, particularly by the Iranians, from without. European trading began in the Persian Gulf area in the mid- 1600s century and expanded during the 1800s. During the First World War, the Ottoman Empire sided with Germany and Austria-Hungary against the United Kingdom and its allies. British troops invaded from Persia (now Iran) and captured Baghdad on 11 March 1917. On 10 January 1919, the United Kingdom established Iraq, which had not previously existed as a separate nation, from three former Ottoman provinces. Iraq became a British mandate under the League of Nations. The British imported a Saudi Arabian prince and made him king in a carefully managed plebiscite in 1921. Oil was discovered in October 1927; it soon became Iraq's most important export, and remains so today (2004).

The United Kingdom granted independence to Iraq on 3 October 1932, after Iraqis became increasingly resentful of British rule. British troops occupied Iraq from 1941 to 1945 to oust a pro-German prime minister and prevent other pro-German sentiment from being effective during the Second World War. After the war there was recurrent political unrest. A revolution by military officers ended the monarchy in 1958, and a succession of military coups went on until 1968, when the socialist Ba'ath Party took control. The economy fell under a kind of central planning, already begun in many areas from mid 1964. The Ba'athist leader Saddam Hussein became president (dictator) in 1979. The standard of living of Iraqis reached its peak at this time. Then, in 1980 Saddam Hussein tried to take advantage of the unsettled political situation in Iran by invading, but the war developed into a costly, bloody stalemate that ended in 1988 without Iraqi gains. On 2 August 1990 Iraqi troops invaded Kuwait. A coalition led by the United States expelled them in a short campaign, the Persian Gulf War of 24 February-3 March 1991. The Kurdish areas of northern Iraq from this time became de facto independent under the protection of the United States. In April-May 2003, U.S. and British forces invaded Iraq, on the grounds that the regime of Saddam Hussein was violating agreements it had signed after the Gulf War. In less than a month, the U.S. and British forces overthrew the regime of Saddam Hussein and promised to establish the first democratic government in Iraq's history.



Wars since 1500

Turko-Persian War of 1514-1516; Turko-Persian War of 1526-1555; Turko-Persian War of 1616-1618; Turko-Persian War of 1623-1638; Turko-Persian War of 1743-1747; Persian Civil War of 1747-1760; First World War in the Middle East, 1914-1918 (Ottoman Empire against United Kingdom and France); Iraqi Revolt, 1920 (against British rule); Kurdish Rebellion of 1922-1932; First Ikhwan Rebellion, 1927-1928 (Ikhwan raiders against Iraq and Saudi Arabia); Second World War in the Middle East, 1941 (United Kingdom against Germany and Vichy France; Iraq was sympathetic to Germany); Iraqi troops were involved in the Arab-Israeli War of 1948-1949, the Six-Day War, 1967, and the Arab-Israeli War of 1973, on Syrian soil; Iraqi Kurdish Revolt of 1961-1963; Iraqi Kurdish Revolt of 1968-1970; Iraqi Kurdish Uprising of 1974-1975; Iran-Iraq War of 1980-1988; Persian Gulf War, 1990-1991 (Iraq against United States, Kuwait, Saudi Arabia, and allies); Iraqi Kurdish Secession, 1991-2003; Iraq-U.S. War, 2003 (against United States, United Kingdom, and Australia).



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

The United Kingdom excluded Iraq from the sterling area in May 1941, during a period of about one month when Iraq had a pro-German government. The United Kingdom readmitted Iraq into the sterling area in November 1941 after invading Iraq and overthrowing the government. Iraq imposed exchange controls on 24 November 1941 (Iraq, Exchange Control Law, No. 71 of 1941). Iraq left the sterling area on 23 June 1959. It adopted the principle of external convertibility on 1 September 1961 (Iraq, Exchange Control Law, No. 19, 27 March 1961). It is unclear how long this lasted.



Other

Defaults on or restructurings of debt to the foreign private sector: 1990 (related to Persian Gulf War); 2003 (related to U.S. invasion).

Banking crises: Banking system ceased functioning for a few months after war with United States.

Frankel and Rose (1996) list of currency crashes: Iraq not included, but a crash occurred in 2003, related to war with United States.

After the Gulf War of 1991, Kurdish areas in northern Iraq became in effect independent under U.S. protection. They used the "Swiss print" Iraqi dinar printed from 1979-1989 while the rest of Iraq used "Saddam Hussein" dinars. A currency reform of 2003, described below, reunified the currency.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Al-Bustanyi (1984), Central Bank of Iraq (1997), Eldem (1999a), Iversen (1954), Jalili (1949), Jones (1986).



Monetary authorities: Iraq

Dates Type Name Legal basis Remarks
May 1890

-9 July 1915

central bank (with commercial banking functions and mainly private ownership) (as part of currency union) Ottoman pound (lira) (issued by central bank Banque Ottomane Impériale [also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank] [headquarters Constantinople (now Istanbul), Turkey]) United Kingdom, royal charter of the Imperial Bank of Persia, 2 September 1889; Ottoman Empire, Act of Concession of the Imperial Ottoman Bank, 4 February 1863 Iraq was part of the Ottoman Empire. The first bank was the Imperial Bank of Persia (headquarters London, England), in Baghdad, in May 1890. The second bank was the Ottoman Bank, which opened a Baghdad branch in 1892; its notes do not seem to have circulated widely until it established the branch. The Ottoman government had issued notes on occasion, but they do not seem to have circulated outside of Constantinople (now Istanbul). The first coins were issued in the 300s BC.
10 July 1915

-March 1917

government issue alongside central bank (with commercial banking functions and mainly private ownership) (as part of currency union) Ottoman government alongside Banque Ottomane Impériale (also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank) (headquarters for both Constantinople [now Istanbul], Turkey) Ottoman Empire, Act No. 207, 12 April 1915 The Ottoman government issued notes (evrak- nakdiye) following the Ottoman Empire's entry into the First World War.
March 1917

-31 March 1932

dollarization Indian rupee (issued by Government of India [headquarters New Delhi, India]) The British introduced the colonial Indian rupee almost immediately upon beginning their conquest of Iraq in early 1915. I date dollarization for the country as a whole as starting with the British capture of Baghdad.
1 April 1932

-30 June 1949

currency board Iraq Currency Board (headquarters London, England) Iraq, Iraq Currency Law, No. 44, 19 April 1931; Law No. 101, 12 December 1931; royal iradah (decree) of 1 March 1932 Established a currency board upon British advice despite some local sentiment for a central bank. Originally the board was to have opened 1 July 1931, but it was delayed.
1 July 1949

-present

central bank Masrif al-Watan al-'Irq (National Bank of Iraq) / Bank al-Markaz al-'Irq (Central Bank of Iraq) from 1 July 1956 (headquarters Baghdad, Iraq for both) Iraq, National Bank of Iraq Law, No. 43, July 1947; Law No. 42 of 1947; royal decree of 31 March 1949; Central Bank of Iraq Law, No. 72 of 1956 Established a central bank to signal the country's political autonomy. Iraq joined the IMF on 27 December 1945, as an original member. Iraq nationalized banks and insurance companies on 14 July 1964.



Exchange rate arrangements: Iraq

Dates Arrangement Legal basis Remarks
1500s

-March 1917

fixed; officially used Ottoman currency, but in practice Indian rupee was more widely used from mid or late 1800s Iraq was part of the Ottoman Empire. The Indian rupee, which did not suffer the debasement that beset Ottoman coins, was widely used. Officially, all foreign coins were banned in 1883 (Ottoman Empire, circular of 25 January 1883), though they were later accepted for some payments (Ottoman Empire, circular of June 1894). The Ottoman lira was a decimal currency from 1881.
March 1917

-31 March 1932

fixed; used Indian rupee The British introduced Indian rupee, one of their colonial currencies, upon conquering Iraq during First World War. The rupee was already familiar because it was widely used in trade. It was not a decimal currency.
1 April 1932

-17 December 1946

fixed; 1 Iraqi dinar = UK£1 Iraq, Iraq Currency Law, No. 44, 19 April 1931; Law No. 101, 12 December 1931 Iraq established its own currency, which unlike the Indian rupee was decimalized; it was divided into 1,000 fils. "Dinar" derives from the Latin denarius, a silver coin of ancient Rome. Through the April 1931 law, the Iraqi dinar was to have had a gold value equal to the pound sterling, but the pound sterling was floated against gold on 21 September 1931, so the December 1931 law removed the planned gold parity. Indian rupees were exchanged at 1 Indian rupee = 0.075 Iraqi dinars from 1-28 April 1932, 1 Indian rupee = 0.074 Iraqi dinars from 29 April-5 May 1932, and 1 Indian rupee = 0.0745 Iraqi dinars from 6 May-30 June 1932. These were equal to the prevailing rates in London of the Indian rupee against the pound sterling.
18 December 1946

-30 June 1949

fixed; 1 Iraqi dinar = UK£1 = US$4.03 = 3.58134g gold Iraq registered a gold parity with the IMF.
1 July 1949

-19 September 1949

hard peg; 1 Iraqi dinar = UK£1 = US$4.03 = 3.58134g gold Iraq, National Bank of Iraq Law, No. 43, July 1947; Law No. 42 of 1947 Iraq replaced its currency board with a central bank, so the exchange rate changed from fixed to a hard peg.
20 September 1949

-22 June 1959

hard peg; 1 Iraqi dinar = UK£1 = US$2.80 = 2.48828g gold Iraq, Law No. 42 of 1947 Followed the United Kingdom's devaluation of the pound sterling on 18 September 1949.
23 June 1959

-4 July 1964

hard peg; 1 Iraqi dinar = US$2.80 = UK£1 = 2.48828g gold Switched to the US dollar as the anchor currency, at the prevailing cross rate with pound sterling.

RR: De facto peg to pound sterling / dual market.

5 July 1964

-17 November 1967

hard peg, multiple rates; official rate 1 Iraqi dinar = US$2.80 = UK£1 = 2.48828g gold Iraq, Law No. 87 of 1964 Introduced excise taxes on transfers of foreign exchange for Iraqis leaving the country.

RR: De facto peg to pound sterling / dual market.

18 November 1967

-22 August 1971

hard peg, multiple rates; official rate 1 Iraqi dinar = US$2.80 = UK£1.166 = 2.48828g gold Did not follow the devaluation of the pound sterling on 18 November 1967. The central bank suspended foreign-exchange dealings on 16 August 1971 and resumed on 23 August 1971, but licensed dealers were authorized to continue certain transactions.

RR: De facto peg to pound sterling / dual market.

23 August 1971

-20 December 1971

hard peg, multiple rates; official rate 1 Iraqi dinar = UK£1.166 = 2.48828g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Iraq remained pegged to the pound sterling and in effect unpegged from the US dollar.

RR: De facto peg to pound sterling / dual market.

21 December 1971

-31 March 1972

hard peg, multiple rates; official rate 1 Iraqi dinar = UK£1.166 = US$3.04 = 2.48828g gold (nominally) Repegged to the US dollar after the United States devalued the dollar against gold on 18 December 1971. Iraq adopted wider margins. The central bank suspended foreign-exchange quotations from 24 June-2 July 1972 after the United Kingdom floated the pound sterling on 23 June 1972.

RR: De facto peg to pound sterling / dual market.

1 April 1972

-2 July 1972

hard peg, 1 Iraqi dinar = UK£1.166 = US$3.04 = 2.48828g gold (nominally) Unified the exchange rate by abolishing the exchange tax on people leaving Iraq. After the United Kingdom floated the pound sterling on 23 June 1972, Iraq's central bank suspended foreign-exchange quotations on 24 June 1972, resuming on 3 July 1972.

RR: De facto peg to pound sterling / dual market.

3 July 1972

-12 February 1973

hard peg, 1 Iraqi dinar = US$3.04 = 2.48828g gold (nominally) Switched to the US dollar as the anchor currency.
13 February 1973

-31 March 1978

hard peg, 1 Iraqi dinar = US$3.3778 = 2.48828g gold (nominally) Did not follow the devaluation of the US dollar on 13 February 1973.
1 April 1978

-16 October 1982

hard peg, 1 Iraqi dinar = US$3.3778 International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members.

RR: Managed float / parallel market from January 1982.

17 October 1982

-1994?

hard peg, 1 Iraqi dinar = US$3.2169 Devalued by 5%. A currency confiscation occurred on 5 May 1993 as Iraq withdrew 25-dinar "Swiss print" notes from circulation (Iraq, decision of cabinet and Revolutionary Command Council, 2 May 1993). Notes were exchanged at 25 new dinars = 25 old dinars until 10 May 1993, but Iraq closed its borders to prevent foreign holders from repatriating the notes during the redemption period. After the period was over, the notes became worthless in areas controlled by the government of Saddam Hussein. The 25-dinar Swiss-print notes continued to be valid in Kurdish areas, which since the Persian Gulf War of 1991 had become de facto independent.

RR: Managed float / parallel market. Multiple rates in 1982 and 1983.

1994?

-29 June 2001

hard peg; 1,750 Iraqi dinars = US$1 The IMF source shows this exchange rate as of 1994 but does not say when it began. Iraq released little information to the IMF after the 1991 Persian Gulf War.

RR: Managed float / parallel market to December 1997, when data end.

30 June 2001

-19 March 2003

managed float The IMF reclassified the exchange rate arrangement in light of information that state banks could buy and sell foreign currency at prevailing market rates. The actual change of arrangements was probably earlier.
20 March 2003

-3 October 2003

clean float With the US invasion of Iraq on 20 March 2003, the exchange rate arrangement became in effect a clean float for a time.
4 October 2003

-14 October 2003

managed float Returned to a managed float, with the central bank determining the exchange rate using rates resulting from foreign-exchange auctions.
15 October 2003

-present

(new) Iraqi dinar, managed float Introduced a new design of currency across the whole country, including Kurdish areas that had used the "Swiss print" dinar printed from 1979-1989. Currency was exchanged at 1 new Iraqi dinar = 1 old Iraqi dinar, or 150 new Iraqi dinars = 1 Swiss print dinar. Approximately 4 trillion old dinars are expected to be exchanged. Old dinars ceased being legal tender on 15 January 2004.



Israel



Political sketch

Formerly Palestine. Independent from the United Kingdom on 14 May 1948.

By 1517 present-day Israel was firmly in the grasp of the Ottoman Turks. A brief incursion by Napoleon in 1798-1799 brought back Egyptian control. Palestine was returned to the Ottomans in 1840. Jewish efforts to reestablish a national state in Palestine began in the late 1800s in a movement known as Zionism. The first Zionist settlement was established in Palestine in 1882. During the First World War, the Ottoman Empire sided with Germany and Austria-Hungary against the United Kingdom and its allies. British troops based in Egypt, which at the time was a British protectorate, conquered Palestine in 1917-1918. The Balfour Declaration of 1917 had stated the British government's support of a national Jewish homeland in Palestine. This policy assumed increased importance after British occupation. Palestine became a League of Nations mandate of the United Kingdom in 1923. Nazi Germany's persecution of Jews increased Jewish migration to Palestine in the 1930s and early 1940s. Relations between Jews and Arabs deteriorated. Partition into Jewish and Arab sectors was proposed but rejected.

After the Second World War, the United Kingdom relinquished its mandate. In 1947 the United Nations voted to partition Palestine into separate Jewish and Arab states. Neighboring Arab countries opposed a Jewish state, and declared war on Israel after it proclaimed its independence on 14 May 1948. Israel was victorious. During the Six-Day War (5-10 June 1967), Israel made pre-emptive strikes against its neighbors after Egypt gave indications it was preparing an invasion. Israel gained the West Bank from Jordan, the Gaza Strip and Sinai peninsula from Egypt, and the Golan Heights from Syria. Another war between Israel and its Arab neighbors followed in 1973. Israel and Egypt signed a peace treaty in 1979, under which Israel relinquished the territory it had gained from Egypt in 1967. The question of a Palestinian state and Jewish settlement in the West Bank, Gaza Strip, and Golan Heights continued to hamper relations with Arab states. In 1982 Israel invaded Lebanon in an unsuccessful effort to expel guerrillas belonging to the Palestine Liberation Organization (PLO). Beginning in late 1987 Israel faced the disorders and riots that were to characterize the uprising (intifada) of Palestinian Arabs in the West Bank and the Gaza Strip. In 1993 Israel and the Palestine Liberation Organization agreed upon a five-year transition involving the gradual extension of self-government to the Palestinians of the West Bank and the Gaza Strip. In 2001, following a stalemate in talks over the boundaries of the proposed Palestinian state, Palestinian terrorist groups, with the tacit support of the Palestinian Authority, launched a campaign of suicide bombings of Israeli civilians that continues today (2004). Israel signed a full peace treaty with Jordan in 1994. Despite a hostile external environment and often fractious internal politics, Israel achieved significant economic growth (based in recent years on an emphasis on technology) and has long had a much higher standard of living than its neighbors. It has been a democracy since independence.



Wars since 1500

Mamluk-Ottoman War of 1516-1517; Ottoman-Druze War of 1611-1613; First World War in the Middle East, 1914-1917 (Ottoman Empire against United Kingdom and France); Arab-Jewish riots, 1920, 1929; Irgun Terrorist Campaign, 1931-1948 (against United Kingdom and to some extent Palestinian Arabs); Palestinian uprisings, 1936-1939; Second World War in the Middle East, 1941 (United Kingdom against Germany and Vichy France); Arab-Israeli War of 1948-1949 (Israel against Egypt, Transjordan [now Jordan], Syria, and Lebanon); Arab-Israeli War of 1956 (Suez War, Sinai War) (Israel, United Kingdom, and France against Egypt); Palestinian Guerilla Raids, c. 1960-1993; Six-Day War, 1967 (Israel against Egypt, Jordan, and Syria); Arab-Israeli War of 1973 (Yom Kippur War) (Israel against Egypt and Syria); Lebanese Civil War of 1975-1990 (Israel invaded in 1982); Palestinian Intifada of 2001-present (2004) (Palestinians against Israel).



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Palestine, including what are today Israel, Jordan, the West Bank, and the Gaza Strip, became part of the sterling are 21 September 1939, soon after the start of the Second World War. Exchange controls were introduced with its entry into the sterling area. The United Kingdom excluded Palestine from the sterling area without prior notice on 22 February 1948 because of the impending end of the British mandate for Palestine.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: A small run in 1914, after the First World War began (Ottoman authorities declared a banking moratorium, allowing bank deposits to be withdrawn only gradually); a run on small banks 1935, related to Italy's impending invasion of Abyssinia (Ethiopia); a run on small banks in 1939 after the Second World War began; a crisis at the beginning of 1969; almost all banks affected by erosion of capital 1977-1983.

Frankel and Rose (1996) list of currency crashes: Israel not included.

The Anglo-Palestine Bank issued "registered checks" in round sums from late 1914 early 1915 to alleviate a shortage of currency. The Ottoman Empire had suspended the gold standard as a result of entering the First World War. The registered checks were exchanged in the black market at 80-90% of their face value in terms of gold, which was higher than the notes of the Ottoman Bank (Banque Ottomane Impériale). The Ottoman governor of Palestine was suspicious of the Anglo-Palestine Bank's times to the United Kingdom, which was at war with the Ottoman Empire. On 15 January 1915, the governor ordered the Anglo-Palestine Bank to be liquidated and ordered the public to turn in the registered checks. Only one check was turned it. British forces conquered Palestine from the Ottomans before the liquidation of the bank could be completed (Halevi 1981: 45-6).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Berlin (2001), Bruno (1993), Crossley and Blandford (1975), Haffner (1970), Halevi and others (1981), Heth (1966), Konikoff (1946), Michaelis (1986) Ottensooser (1955).

Monetary authorities: Israel

Dates Type Name Legal basis Remarks
1892

-9 July 1915

central bank (mainly private ownership) (as part of currency union) Ottoman piastre (issued by central bank Banque Ottomane Impériale [also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank] [headquarters Constantinople (now Istanbul), Turkey]) Ottoman Empire, Act of Concession of the Imperial Ottoman Bank, 4 February 1863 Israel was part of the Ottoman Empire. An Ottoman act of 1878 allowed foreign banks to establish branches in the Ottoman Empire without special licenses. The first bank was Crédit Lyonnais (headquarters Paris, France), in Jerusalem, in 1892. The second bank may have been the Anglo-Palestine Company (later Anglo-Palestine Bank) (headquarters London, England), which established a branch in Jaffa (now part of Tel Aviv) on 2 August 1903. The Ottoman Bank established a branch in Jerusalem in 1904. The first coins were issued in the 300s BC.
10 July 1915

-December 1917

government issue alongside central bank (with commercial banking functions and mainly private ownership) (as part of currency union) Ottoman government alongside Banque Ottomane Impériale (also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank) (headquarters for both Constantinople [now Istanbul], Turkey) Ottoman Empire, Act No. 207, 12 April 1915 The Ottoman government issued notes (evrak- nakdiye) following the Ottoman Empire's entry into the First World War.
December 1917

-31 October 1927

dollarization Egyptian pound (issued by central bank National Bank of Egypt [headquarters Cairo, Egypt]) United Kingdom, Army, proclamation by commander (General Allenby), 23 November 1917 The British introduced the Egyptian pound upon conquering what is now Israel during the First World War. Egypt was a British protectorate.
1 November 1927

-16 August 1948

joint currency board Palestine Currency Board (headquarters London, England) United Kingdom, Secretary of State for the Colonies, Regulations Defining the Constitution, Duties and Powers of the Palestine Currency Board, 2 August 1926; United Kingdom, Palestine Currency Order, 7 February 1927; Palestine, Currency Notes Ordinance, April 1927 The British established a currency board, to gain seigniorage for Palestine. The board also served Transjordan (now Jordan) and the Gaza Strip. Egyptian currency and British gold sovereigns ceased to be legal tender after 31 March 1928 (Palestine, proclamation of 9 February 1928; proclamation of 29 February 1928). When Israel became independent on 14 May 1948, it took over monetary legislation previously existing (Israel, Law and Administration Ordinance, 1948).
17 August 1948

-30 November 1954

central bank (with commercial banking functions; private ownership) Anglo-Palestine Bank (headquarters London, England) / Bank Leumi Le-Israel (National Bank of Israel) (headquarters Tel-Aviv, Israel) from 1 May 1951 Israel and Anglo-Palestine Bank, agreement of 16 August 1948; Israel, Bank Notes Ordinance, 16 August 1948 Palestine Currency Board notes and coins ceased to be legal tender on 15 September 1948. By temporary agreement with the Israeli government, periodically extended over the next several years, the Anglo-Palestine Bank (later incorporated in Israel as Bank Leumi Le-Israel) established a separate Issue Department that assumed central banking functions after Israel declared independence and left the Palestine Currency Board. For the Gaza Strip, see the table for the Palestinian Authority.
1 December 1954

-present

central bank Bank Yira'el (Bank of Israel) (headquarters Jerusalem, Israel) Israel, Bank of Israel Law, 1954 Israel established a government-owned central bank having no commercial banking functions. Israel joined the IMF on 12 July 1954.



Exchange rate arrangements: Israel

Dates Arrangement Legal basis Remarks
1517?

-December 1917

fixed; used Ottoman pound (lira) The conquest of present-day Israel by the Ottoman Empire was complete by 1517. The Ottoman pound became a decimal currency in 1881.
December 1917

-31 October 1927

fixed; used Egyptian pound United Kingdom, Army, proclamation by commander (General Allenby), 23 November 1917; Palestine, Public Notice of 1 February 1921 The British introduced the Egyptian pound upon conquering Palestine during the First World War. The exchange rate was 1 gold Ottoman pound (lira) = Egyptian £0.8775. Egypt was a British protectorate at the time. The Egyptian pound was a decimal currency, divided into 1,000 millièmes.
1 November 1927

-20 September 1931

fixed (as part of currency union); Palestine £1 = UK£1 = 7.32238g gold United Kingdom, Palestine Currency Order, 7 February 1927 Introduced the Palestine pound. Banks completed the changeover of currency in a single day. The exchange rate was Palestine £1 = Egyptian £0.975. The Palestine pound was a decimal currency, divided into 1,000 mils. Egyptian currency and British gold sovereigns ceased to be legal tender after 31 March 1928 (Palestine, proclamation of 9 February 1928; proclamation of 29 February 1928).
21 September 1931

-16 August 1948

fixed (as part of currency union); Palestine £1 = UK£1 The United Kingdom abandoned the gold standard for the pound sterling on 21 September 1931, and the Palestine pound followed.
17 August 1948

-13 February 1952

hard peg; Israeli (Palestine) £1 = UK£1 Israel, Currency Ordinance, 16 August 1948 Israel had became independent on 14 May 1948 and had taken over monetary legislation previously existing (Israel, Law and Administration Ordinance, 1948). The Israeli pound, issued by central bank, replaced the multinational Palestine pound at Israeli £1 = Palestine £1. The first Israeli notes actually continued to have the words "Palestine pound"; a second issue with the words "Israeli pound" began circulating in June 1952.

RR: Parallel market to December 1950. Freely falling from January 1951, with parallel market premium peaking in February 1952 at 678%.

14 February 1952

-31 December 1953

hard peg, multiple rates; official rate Israeli £1 = UK£1 = US$2.80 Introduced a second exchange rate of Israeli £1 = US$1.40 and third rate of Israeli £1 = US$1. A currency confiscation of 10% occurred on 9 June 1952. Notes bearing the name of Bank Leumi le-Israel were exchanged for notes bearing the name of the Anglo-Palestine Bank. The confiscation applied to all note denominations of Israeli £5 and above and all bank deposits of Israeli £50 and above. Confiscated amounts were converted into government loan certificates bearing 4% annual interest (Israel, Compulsory Loan of 1952 [5721 by the Hebrew calendar]).

RR: Multiple rates / parallel market.

1 January 1954

-30 June 1955

hard peg; Israeli £1 = US$1 Switched to the US dollar as the anchor currency and devalued from the previous cross rate of Israeli £1 = US$2.80. Israel has had persistent problems with inflation and currency depreciation to the present.

RR: Multiple rates / parallel market.

1 July 1955

-February 1956

hard peg; Israeli £1.80 = US$1 Unified the exchange rate. The new rate was one of the old multiple rates.

RR: Multiple rates / parallel market. Parallel market premium falls into double digits.

February 1956

-12 March 1957

hard peg, multiple rates; official rate Israeli £1.80 = US$1 Introduced multiple rates.

RR: Multiple rates / parallel market.

13 March 1957

-8 February 1962

hard peg, multiple rates; official rate Israeli £1.80 = US$1, or Israeli £1 = 0.493706g gold Israel registered a gold parity with the IMF.

RR: Multiple rates / parallel market.

9 February 1962

-18 November 1967

hard peg; Israeli £3 = US$1, or Israeli £1 = 0.296224 gold Devalued and unified the exchange rate.

RR: Peg to pound sterling.

19 November 1967

-20 August 1971

hard peg; Israeli £3.50 = US$1, or Israeli £1 = 0.253906g gold Devalued against the US dollar following the United Kingdom's devaluation of pound sterling on 18 November 1967.

RR: Peg to pound sterling.

21 August 1971

-16 May 1972

hard peg; Israeli £4.20 = US$1, or Israeli £1 = 0.211588g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Israel devalued against the US dollar and gold.

RR: Managed float / parallel market.

17 May 1972

-3 May 1974

hard peg; Israeli £4.20 = US$1, or Israeli £1 = 0.194884g gold (nominally) Devalued against the now notional gold parity. The United States had devalued against gold on 12 May 1972. Israel did not follow the devaluation of the US dollar against gold on 13 February 1973, but neither did it revalue against the US dollar.

RR: Managed float / parallel market to September 1973. Freely falling / managed float / parallel market from October 1973.

4 May 1974

-9 November 1974

hard peg; Israeli £4.20 = US$1, or Israeli £1 = 0.175396g gold (nominally) Belatedly devalued the (inoperative) gold parity to bring it into accord with the US devaluation of 13 February 1973.

RR: Freely falling / managed float / parallel market.

10 November 1974

-17 June 1975

hard peg; Israeli £6 = US$1, or Israeli £1 = 0.122777g gold (nominally) Devalued.

Freely falling / managed float / parallel market.

18 June 1975

-4 August 1975

crawling peg, multiple rates; Israeli £6.12 = US$1, or Israeli £1 = 0.12037g gold (nominally) Devalued and began a crawling peg. Sometime in 1975 the so-called NATAD exchange rate began to diverge substantially from the official rate, making the exchange rate a dual rate. Israel also had various export rebates that worked like multiple exchange rates. The IMF classified Israel as having had a unitary rate since 1962 and continuing to have one here.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

5 August 1975

-8 September 1975

crawling peg, multiple rates; Israeli £6.24 = US$1 Devalued and announced that the exchange rate would no longer necessarily be based on the gold par value. The system of gold par values officially ended by agreement of IMF members effective 1 April 1978 (International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ["Second Amendment"]).

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

9 September 1975

-27 September 1975

crawling peg, multiple rates; Israeli £6.36 = US$1 Devalued.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

28 September 1975

-23 November 1975

crawling peg, multiple rates; Israeli £7 = US$1 Devalued.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

24 November 1975

-3 January 1976

crawling peg, multiple rates; Israeli £7.10 = US$1 Devalued.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

4 January 1976

-10 February 1976

crawling peg, multiple rates; Israeli £7.24 = US$1 Devalued.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

11 February 1976

-10 March 1976

crawling peg, multiple rates; Israeli £7.38 = US$1 Devalued.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

11 March 1976

-17 April 1976

crawling peg, multiple rates; Israeli £7.32 = US$1 Revalued slightly.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

18 April 1976

-19 May 1976

crawling peg, multiple rates; Israeli £7.67 = US$1 Devalued.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

20 May 1976

-23 June 1976

crawling peg, multiple rates; Israeli £7.82 = US$1 Devalued.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

24 June 1976

-17 July 1976

crawling peg, multiple rates; Israeli £7.97 = US$1 Devalued.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

18 July 1976

-27 October 1977

basket, multiple rates Israel, announcement of 22 February 1980 Switched the anchor to a basket of five currencies, whose undisclosed weights were based primarily on Israel's exports. The initial cross rate was £8.12 = US$1.

RR: Freely falling / managed float / parallel market. Premium in 20-70% range during period of official crawling peg.

28 October 1977

-21 February 1980

basket Unified the exchange rate.
22 February 1980

-3 September 1985

Israeli shekel, managed float Introduced a new currency gradually from this date to 1 October 1980, at 1 Israeli shekel = Israeli £10. The shekel, whose name is derived from the Hebrew word for "weight," was an ancient Hebrew unit of weight and coin. The managed float was punctuated by period larger depreciations, as measured against the US dollar. There were depreciations of 7% on 10 August 1983, 19% on 11 October 1983, 8% on 17 September 1984, and 15.84% on 1 July 1985, as well as various smaller adjustments.

RR: Freely falling /managed float.

4 September 1985

-31 July 1986

Israeli new shekel (sheqel, plural sheqalim), managed float Introduced another new currency at 1 Israeli new shekel = 1,000 Israeli old shekels.

RR: Preannounced crawling band around US dollar with width of +/-2% from October 1985.

1 August 1986

-16 December 1991

basket Linked the currency to a trade-weighted basket of the US dollar, German mark, pound sterling, French franc, and Japanese yen (the currencies comprising the SDR at the time). The currency was depreciated 4.8% against the US dollar on 27 December 1988, and depreciated against the basket 8% on 3 January 1989 and 4.4% on 23 June 1989. There were no set daily margins of fluctuation before 1989. From 3 January 1989-28 February 1990 the daily margin was +/-3% with respect to the basket. From 1 March 1990-16 December 1991 the daily margin was +/-5%.

RR: Preannounced crawling band around US dollar with width of +/-2% August 1986. Freely falling / de facto crawling band around US dollar with width of +/-2% September 1986-December 1986. De facto crawling band around US dollar with width of +/-2% January 1987-2 January 1989. Preannounced crawling band around US dollar with de facto width of +.-2% 3 January 1989-28 February 1990. De facto crawling band around US dollar with de facto width of +/-2% 1 March 1990-January 1991. De facto crawling band around US dollar from February 1991.

17 December 1991

-present

crawling band (IMF: managed float, reclassified as crawling band 1998) The currency was allowed to depreciate at a daily rate amounting to an annual devaluation of 9% against the US dollar. The midpoint was devalued 3% on 9 November 1992 and the annual rate of depreciation was reduced to 8%. The annual rate of depreciation was further reduced to 6% on 26 July 1993. All this took place within a band of daily fluctuations of +/-5% around the midpoint, widened to +/-7% 1 June 1995. On 17 June 1997 the band width was widened to +/-15%. The upper (depreciated) limit of the band had widened at 6% annually since 26 July 1993. The lower (appreciated) limit of the band had widened at 4% annually since June 1997, but on 6 August 1998 it was reduced to 2% a year. By the end of 2002, the cumulative effect of annual changes had widened the band to 49%. On 23 December 2001 the lower (appreciated) limit of the band became flat.

RR: De facto crawling band around US dollar with de facto width of +/-5%.



Japan



Political sketch

The portion of Japan's history relevant to modern monetary systems may conveniently be recounted from 1542, when Portuguese sailors aboard a Chinese vessel became the first Europeans to land in Japan. At the time, Japan was in the midst of a period when various regional factions contended against one another. It became politically unified again in 1600. During the period of the Tokugawa shoguns (hereditary chiefs of the army, the de facto rulers more powerful than the emperor) (1603-1867), the government imposed a policy of isolation. It persecuted Japanese converts to Christianity, expelled all foreigners except a few traders, and forbade Japanese from traveling abroad. Japan enjoyed peace and stability, but was cut off from developments in the outside world, including new military technology. In 1853 the U.S. Navy made a peaceful show of force that demonstrated to the Japanese their military inferiority and compelled them to reopen the country to outside influence. The opening had some influence on the internal political struggles that led to the end of Tokugawa rule and the enthronement of the emperor Meji in 1868. Under his rule, which lasted until 1912, Japan began a remarkable absorption of Western science, technology, and to some extent political ideas. Japan established a constitution in 1889 that provided for an elected parliament, the Diet. However, the emperor, military, and a few top political leaders exercised power oligarchically; the system was not a democracy.

Japan developed a strong military that enabled it to successfully wage war against China (1894-1895) and Russia (1904-1905). It annexed Taiwan from China and some northern islands from Russia. In 1910 Japan invaded Korea. In 1931 it invaded the Chinese province of Manchuria, renaming it Manchukuo. In 1937 it invaded northern China and took control of the major cities. During the Second World War it allied with Nazi Germany. On 7 December 1941, Japanese forces attacked U.S. forces in Hawaii; on 8 December 1941 Japanese forces in East Asia attacked various European colonies and the Philippines (a U.S. colony). Japanese conquest reached its greatest extent in 1942, extending across much of the western Pacific, eastern China, Southeast Asia, and Burma. Then Japanese forces were gradually forced back by U.S. and other Allied troops. In August 1945 the United States dropped atomic bombs on Hiroshima and Nagasaki. Japan surrendered on 2 September 1945.

U.S. forces established an occupation authority that governed Japan until a peace treaty became effective on 28 April 1951. They remade Japan's political system, giving root to the democratic institutions Japan has had ever since. (The emperor remains, but as a constitutional monarch). Under the constitution of 1947, Japan renounced military aggression against other countries; reduced the emperor to a symbolic role; and became a democracy, although one usually dominated by a single political party, the Liberal Democratic Party. The United States also made extensive changes to Japan's economy during the occupation. Early U.S. ambivalence about an economically strong Japan faded during the Korean War (1950-1953) as the United States realized the potential advantages of a strong and friendly Japan. The industriousness of the Japanese people and economic policies favorable to growth sparked a long boom that by the 1980s made Japan by some measures the richest large country. Japan remains a manufacturing powerhouse, but since 1990 the economy has experienced sluggish growth because of tax increases, inappropriate monetary policy, and political inability to force restructuring of poorly performing financial institutions and other corporations.



Wars since 1500

Japanese Civil Wars of 1560-1584; Japanese Conquest of Korea, 1592-1599; Battle of Sekigahara, 1600; Siege of Osaka Castle, 1614-1615; Shimabara Revolt, 1637-1638; Meiji Restoration, 1863-1869; Shimonseki "War," 1863-1864; Satsuma Revolt, 1877; Sino-Japanese War of 1894-1895; Russo-Japanese War of 1904-1905; First World War, 1914 (Japanese seized lightly guarded German colonies in the Pacific); Russian Civil War, 1918-1922 (Japanese forces occupied part of the Russian Far East); Samil Independence Movement, 1919-1920 (in Korea, a Japanese colony); Sino-Japanese War of 1937-1945; Japanese-Soviet Border Clashes, 1938-1939; Second World War in the Pacific, 1941-1945 (Japan against United States, United Kingdom, Netherlands, China, and allies).



Convertibility

During the First World War, exports of silver were forbidden starting on 6 September 1917. Exports of gold were forbidden from 12 September 1917 (five days after the United States prohibited exports of gold and silver) until Japan resumed the gold standard on 11 January 1930. The embargo by the United States closed Japan's major remaining outlet for buying and selling gold, since European countries had imposed gold embargos much earlier in the war. Exchange controls were again imposed by Japan, Capital Flight Prevention Act, 1 July 1932, and strengthened by Japan, Foreign Exchange Control Act of 1933, effective 1 May 1933. The yen would not become fully convertible until May 1979, when liberalization began for capital flows; the liberalization was completed on 1 December 1980.

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

Exchange controls continued in the first years of the U.S. occupation of Japan, at the insistence of the occupation forces.



Other

Defaults on or restructurings of debt to the foreign private sector: 1942 (related to Second World War).

Banking crises: Failure of exchange houses and bill brokers that performed some banking functions in 1868; liquidation of seven of eight government-sponsored bill brokers (kawase kaisha, which had been established to encourage the circulation of government notes) in 1872; a small bank run in 1874, concentrated on Tokyo and Osaka; bank runs in 1901 after a Yokohama bank stopped payments; bank runs from April-August 1914 starting in Osaka and spreading to Nagoya, Kyoto, and Tokyo; bank runs from April-June 1920 during a recession following the First World War; bank runs in 1922 during a period of deflation; a debt moratorium on 7 September 1923, after an earthquake destroyed much of Tokyo and Yokohama; financial panic from March-April 1927, resulting in a 21-day banking moratorium; major government rescue and government-sponsored restructuring of banking system in 1998, estimated as of 1999 to cost 15-20% of GDP.

Frankel and Rose (1996) list of currency crashes: Japan not included.

Financial liberalization: A multiyear program was announced in 1996 to deregulate financial markets.

U.S. occupation forces in Japan after the Second World War used occupation military yen for a time. Japanese military yen and occupation currencies were demonetized by the same proclamation (Supreme Commander for the Allied Powers, Proclamation No. 3, 2 September 1945).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Asakura and Nishiyama (1974), Bank of Japan (1982-1985), Fuji Bank (1967), Shinjo (1962), Soyeda (1971 [1896]), Takaki (1903), Tamaki (1995), Tstutsui (1999). Voluminous material exists in Japanese, which I do not read; it includes Nihon Gink (1972-1976, 1978-1996, 1982-1986). Volumes 24-25 of Nihon Gink (1978-1996), dealing with the U.S. occupation, are mainly in English.



Monetary authorities: Japan

Dates Type Name Legal basis Remarks
about 1600

-1630

free banking multiple banks The notes issued by the banks were called yamada hagaki. Government notes were ordered to be printed in 1334 or 1335, but they apparently did not circulate. The first coins were issued in the period 485-487.
1630

-1707

government issue (by clans) alongside free banking local clan governments alongside multiple banks Hansata, currencies issued by clan governments (han), were frequently inconvertible. The ruling families of clans were called daimyo. In many areas, clan governments monopolized note issue.
1707

-1730

free banking multiple banks The central government prohibited clan government notes, both because they were so often inconvertible and because it wanted to be the sole issuer of the monetary base. The sudden shrinkage of the money supply caused deflation and economic stagnation.
1730

-24 May 1868

government issue (by clans and late in period by central government) alongside free banking local clan governments and imperial government (headquarters Kyoto, Japan) alongside multiple banks Japan, proclamation of 1730 The central government again allowed clan government notes (hansata), to support the price of rice. Initially the central government allowed the notes to be redeemable in copper or silver, but in 1755 it ceased granting permission for copper notes. The notes, which were frequently not in fact redeemable, continued to circulate until June 1879. Sometimes clan governments issued them without the permission of the central government. The central government of the Tokugawa regime (1598-1868) issued did not issue notes for the first time until 1867. From 1858-1899, a number for foreign banks issued notes in Japanese ports under treaties of extraterritoriality. The notes were used mainly by foreigners. These issues ceased when extraterritoriality ended in 1899. Because these issues were outside the mainstream of finance (unlike the case in China), for the most part I disregard them.
25 May 1868

-1872

government issue (by clans and central government) alongside free banking local clan governments and imperial government (headquarters Tokyo, Japan) alongside multiple banks Japan, notification of 9 May 1868; proclamation issued sometime in the intercalary month from 22 May-19 June 1868 Under the new Meji regime, the central government began what turned out to be long-term issuance of notes (called daijkansatsu or kinsatsu) as a means of finance during a civil war.
1872

-9 October 1882

government issue (by central government only) alongside free banking government of Japan (headquarters Tokyo, Japan) alongside multiple banks Japan, decree of 14 July 1871 In 1872 the central government began exchanging clan notes (hansata) for central government notes, as provided by the decree of 14 July 1871. Redemption of notes above 5 sen (cents) began first. Small-denomination clan notes were replaced by small-denomination notes up to 50 sen called minbushosatsu, issued by the Civic Department of the central government since September 1869, and later also by central government coins. Redemption of clan notes was completed in June 1879. The minbushosatsu ceased circulating in October 1880. For the government, the Mitsui Company, a large merchant house, issued Treasury Convertible Notes (o-kura-sho-dakkwan-sho-ken) for the government starting in October? 1871 (Japan, ordinances of May and October 1871). The Mitsui Company also issued Colonial Department Convertible Certificates (kai-takku-shi-dakkwan-sho-ken) for the then remote island of Hokkaido from 1872. New issues ceased after May 1877 and the notes were replaced by central government notes (the so-called new paper money, shin-shi-hei). Note-issuing private banks were heavily regulated from July 1873 onward through U.S.-style bond deposit regulations (Japan, National Bank Act, Act No. 349, November 1872). These notes, initially convertible at a fixed rate into gold, became inconvertible in 1876 (Japan, regulation of 1876). First modern bank Tokyo Kokuritsu Daiichi Gink (First National Bank of Tokyo), Tokyo, July 1873.
10 October 1882

-present

central bank Nippon Ginko (also Romanized as Nihon Gink) (Bank of Japan) (headquarters Tokyo, Japan) Japan, Bank of Japan Act, Imperial Ordinance No. 32, 27 June 1882 Established a central bank to end the currency disorder of the previous system, which resulted largely from government use of paper money and the financial system as means of raising revenue. The central bank issued its first notes on 9 May 1885. It gave Japan for the first time a paper money with uniform convertibility (or later, inconvertibility) into precious metals. Initially the government was to own at least half of the stock of the bank; by a revision in February 1942 the government share was set at 55%. Private, nationally chartered note-issuing banks were allowed to continue issuing until their 20-year charters expired, all by 1899. Japan joined the IMF on 13 August 1952.



Exchange rate arrangements: Japan

Special remark: I have relied on Shinjo (1962) and Soyeda (1971 [1896]) for an account of Japan's exchange rate history before 1871. Some parts of that history remain murky to me, since I am unfamiliar with Japanese coinage of the period and with the Japanese language. I welcome comments from knowledgeable readers.

Dates Arrangement Legal basis Remarks
1601

-1695

hard peg; 1 Japanese ryo = 15.1g gold; mint ratio 11.89 parts silver = 1 part gold Japan, edict of shogun Ieyaysu Tokugawa, 1601 The coinage system instituted in the Tokugawa period degenerated from debasements (such as in 1699 and 1710, 1736, 1819, 1853) and issuance of coins by multiple, sometimes illegal, clan mints that were not of legal standard. Until 1873, taxes were paid in rice, so rice functioned as a sort of currency and rice receipts were the foundation of a kind of banking. Paper money was frequently at a discount to silver. The ryo was a weight taken from China (where it was known as the tael; the written characters are the same). The ryo was originally equal to approximately 37.5g. Of various coins issued before the reform of 1871, the gold koban was equal to a ryo. An important silver coin was the bu (bugin, ichibu-gin), legally equivalent to one-quarter of a ryo.
1695

-1706

hard peg; 1 Japanese ryo = 10.3g gold; mint ratio 14.21 parts silver = 1 part gold New coinage; devalued.
1706

-1710

hard peg; 1 Japanese ryo = 10.3g gold; mint ratio 10.93 parts silver = 1 part gold New coinage; changed silver-gold ratio.
1710

-1711

hard peg; 1 Japanese ryo = 7.7g gold; mint ratio 9.47-12.12 parts silver = 1 part gold Devalued.
1711

-1714

hard peg; 1 Japanese ryo = 7.7g gold; mint ratio 5.74 parts silver = 1 part gold Changed silver-gold ratio.
1714

-1716

hard peg; 1 Japanese ryo = 15.2g gold; mint ratio 11.92 parts silver = 1 part gold New coinage; restored old weight.
1716

-1736

hard peg; 1 Japanese ryo = 15.2g gold; mint ratio 11.92 parts silver = 1 part gold New coinage; changed silver-gold ratio.
1736

-1818

hard peg; 1 Japanese ryo = 8.6g gold; mint ratio 11.58 parts silver = 1 part gold Devalued.
1818

-1819

hard peg; 1 Japanese ryo = 7.5g gold; mint ratio 11.58 parts silver = 1 part gold Devalued.
1819

-1820

hard peg; 1 Japanese ryo = 7.5g gold; mint ratio 13.32 parts silver = 1 part gold Changed silver-gold ratio.
1820

-1828

hard peg; 1 Japanese ryo = 7.5g gold; mint ratio 10.24 parts silver = 1 part gold New coinage; changed silver-gold ratio.
1828

-1832

hard peg; 1 Japanese ryo = 2.4g gold; mint ratio 10.24 parts silver = 1 part gold New coinage; devalued.
1832

-1837

hard peg; 1 Japanese ryo = 5.5g gold; mint ratio 10.24 parts silver = 1 part gold New coinage; revalued.
1837

-1859

hard peg; 1 Japanese ryo = 5.5g gold; mint ratio 8.57 parts silver = 1 part gold New coinage. Changed silver-gold ratio.
1859

-1860

hard peg; 1 Japanese ryo = 5.5g gold; mint ratio 5.24 parts silver = 1 part gold New coinage. Before it opened to foreign commerce in 1859, Japan's mint ratio and even its market ratio of silver to gold were far from the world market ratio of about 15.5 parts silver = 1 part gold. The difference offered a huge arbitrage opportunity for foreigners.
1860

-24 May 1868

hard peg; 1 Japanese ryo = 2.0g gold; mint ratio 15.58 parts silver = 1 part gold Undertook a new coinage, reducing the gold content of the ryo, as a way of bringing the mint ratio of silver to gold closer to the world market ratio. The reduction in gold content led to a big inflation. By a central government proclamation of February 1868, Mexican silver dollars were allowed to circulate at Mexican $1 = 3 Japanese silver bu (bugin, ichi-bugin).
25 May 1868

-late 1869

officially, hard peg, 1 Japanese ryo = 2.0g gold; in practice, clean? float Japan, notification of 9 May 1868; proclamation issued sometime in the intercalary month from 22 May-19 June 1868 The central government issued paper money to finance its spending during a civil war. The currency immediately went to a discount against the precious metals, despite legislation outlawing discounts.
late 1869

-3 May? 1871

officially, hard peg; 1 Japanese yen = 24.2606g silver; in practice, clean? float Changed the name of the currency from ryo to yen. "Yen" comes from the Chinese "yuan," meaning "dollar." The yen at first existed as a unit of account only; the first yen coins were minted in October 1870. They had equal silver content to the Mexican silver dollar. It was unclear whether the standard was gold or silver. The yen was a decimal currency.
4 May? 1871

-1875

officially hard peg; 1 Japanese yen = 1.5g gold; in practice, clean? float; mint ratio 16.01 parts silver = 1 part gold Japan, New Coinage Act, 4 May 1871 Attempted to move the country onto the gold standard by making gold the only unlimited legal tender. Silver predominated in trade, though. Government notes seem to have been at a discount to precious metals the whole time. Bank notes issued under the National Bank Act of 1872 were initially convertible at a fixed rate into gold, but the government made them inconvertible in 1876 to stop a drain of gold resulting from deficit in the balance of payments (Japan, regulation of 1876). Thus there existed a dual system of paper and precious metals.
1875

-1876

officially hard peg; 1 Japanese yen = 1.5g gold; in practice, clean? float; mint ratio 16.17 parts silver = 1 part gold Changed the mint ratio of silver to gold.
1876

-February? 1877

officially hard peg; 1 Japanese yen = 1.5g gold; in practice, clean? float; 16.33 parts silver = 1 part gold Changed the mint ratio of silver to gold.
February? 1877

-May 1878

officially hard peg at 1 Japanese yen = 1.5g gold; in practice, clean? float; mint ratio 16.33 parts silver = 1 part gold Abandoned the gold standard during Satsuma Rebellion of 1877.
May 1878

-8 May 1885

officially hard peg at 1 Japanese yen = 1.5g gold = 24.26g silver; in practice, clean? float; mint ratio 16.17 parts silver = 1 part gold Japan, Proclamation of May 1878 This proclamation allowed nationwide circulation of the yen trade dollar, equal in weight and silver content to the Mexican dollar. Before this, the coins had only circulated in ports. The yen trade dollar was given unlimited legal tender status, so Japan was officially bimetallic. In practice, the yen floated. A deflation in the 1880s reversed the inflation that had financed the suppression of the Satsuma rebellion. The deflation caused a number of financial institutions to fail.
9 May 1885

-30 September 1897

1 Japanese yen = 24.26g silver; mint ratio 16.17 parts silver = 1 part gold Japan, Convertible Bank Note Act, Decree No. 18 of Council of Ministers (Daijokwan), 26 May 1884 The Bank of Japan started issuing notes convertible into silver, another manifestation of Japan's difficulty in the late 1800s of deciding whether to be a gold-standard or silver-standard country. By 1886, all paper money was at par with silver.
1 October 1897

-11 September 1917

hard peg; 1 Japanese yen = 0.75g gold; mint ratio 32.34 parts silver = 1 part gold to 1898 Japan, Coinage Act, 26 March 1897; 1897 revision of Convertible Bank Note Act of 1884 Japan switched to the gold standard because most other major nations had done or were doing so. Part of the funds for the switch came from an indemnity paid by China as a result of Japan's victory in the Sino-Japanese War of 1894-1895. Bank of Japan notes were made convertible into gold. The Coinage Act of 1897 was supplemented but not officially replaced by the Temporary Currency Law of 1938. No coinage under the 1897 act was issued after the Second World War. The Law Concerning the Unit of Currency and the Issuance of Coins, April 1998, finally replaced the 1897 act.
12 September 1917

-10 January 1930

managed float Abandoned the gold standard during the First World War. Japan's move followed a US ban on exports of gold and silver on 7 September 1917, which closed Japan's major remaining foreign market for obtaining gold. Monetary policy aimed from 1917-1924 to stabilize the exchange rate at about 2 Japanese yen = US$ and from 1925, when the United Kingdom returned to the gold standard, at about Japanese yen = UK£1.
11 January 1930

-12 December 1931

hard peg; 1 Japanese yen = 0.75g gold Returned to the gold standard after other major countries had done so.
13 December 1931

-second quarter 1933

managed float Japan, suspension of Coinage Act of 1897, December 1931 Abandoned the gold standard after United Kingdom did likewise on 21 September 1931.
second quarter 1933

-September 1939

hard peg; 120 Japanese yen = UK£7, or 1 Japanese yen = UK 1 shilling 2 pence Stabilized the value of the yen against the pound sterling.
September 1939

-24 October 1939

managed float Abandoned the peg to the pound sterling.
25 October 1939

-28 December 1941

hard peg; 4.26-2/3 Japanese yen = US$1 Switched to the US dollar as the anchor currency following the outbreak of the Second World War in Europe.
29 December 1941

-September 1945

in practice, managed float, multiple rates Floated the yen after invading British, U.S., and Dutch possessions to begin Second World War in the Pacific on 7-8 December 1941. The yen had extensive exchange controls. Nominally an exchange rate of 1 Japanese yen = 1.705 German reichsmark existed to May 1945, when the Second World War ended in Europe, but there was little practical way for transactions to occur between the two currencies.

RR: Peg to German reichsmark 29 December 1941-August 1945. Freely falling August 1945-June 1946. Official rate was 15 Japanese yen = US$1 but black market rate was 875 Japanese yen = US$1 in February 1946.

September 1945

-August 1946

officially, hard peg for occupation forces only, military rate 15 Japanese yen = US$1; in practice, managed float with foreign-exchange few transactions The U.S. occupation of Japan began after Japan's defeat in the Second World War. During this period, no foreign exchange rate was quoted for the yen. A currency confiscation occurred on 2 March 1946 (by an announcement of 16 February 1946). Old notes of 10 yen and above were exchanged for new at 1:1 only up to 100 yen; the excess was forcibly converted into time deposits.
August 1946

-11 March 1947

hard peg; 15 Japanese yen = US$1 The U.S. occupation authorities gave the military exchange rate more definite status.
12 March 1947

-4 July 1948

hard peg; 50 Japanese yen = US$1 This military rate for the yen was devalued in the midst of an inflation.
5 July 1948

-24 April 1949

hard peg; 270 Japanese yen = US$1 This military rate for the yen was again devalued in the midst of an inflation.
25 April 1949

-10 May 1953

hard peg; 360 Japanese yen = US$1 Supreme Commander Allied Powers (General Douglas MacArthur), memorandum SCAPIN-1997 to Japanese government, 23 April 1949 A currency reform to end inflation unified the exchange rate and stabilized the yen at the psychologically significant rate of 360 per U.S. dollar. (In Japanese, "yen" is also the word for "circle." The significance of the level seems not to have occurred to U.S. occupation authorities.) This was part of the Dodge Plan of economic reforms.

RR: De facto band of +/-5% around US dollar. Parallel market premium 10-75%.

11 May 1953

-27 August 1971

hard peg; 360 Japanese yen = US$1, or 1 Japanese yen = 0.00246853g gold Japan registered a gold parity with the IMF. The previous official prices of gold since the Second World War had been as follows (in Japanese yen per gram): 20 January 1946: 17; 17 July 1947: 75; 25 September 1947: 150; 22 July 1949: 385; 1 March 1950: 401; 2 February 1953: 405.

RR: De facto band of +/-5% around US dollar and parallel market to March 1959. From April 1959, De facto band of +/-2% around US dollar. Premium in parallel market remained in double digits through early 1960.

28 August 1971

-19 December 1971

managed float; inoperative gold parity 1 Japanese yen = 0.00246853g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Japan responded by floating.
20 December 1971

-13 February 1973

hard peg; 308 Japanese yen = US$1, or 1 Japanese yen = 0.00246853g gold (nominally) Repegged to the US dollar after the United States devalued the dollar against gold on 18 December 1971. The Japanese government closed the foreign-exchange market on 20 December 1971 for one day. The foreign-exchange market also closed on 24 June 1972, after the United Kingdom devalued the pound sterling on 23 June 1972; the market reopened on 29 June 1972.
14 February 1973

-31 March 1978

in practice, managed float; official rate 1 Japanese yen = 0.00246853g gold (nominally) Japan did not follow the devaluation of the US dollar on 13 February 1973; rather, it floated the yen. The previous central rate against the US dollar remained on the books but was unused.

RR: De facto moving band of +/-2% around US dollar to November 1977. Freely floating from December 1977.

1 April 1978

-present

managed float (IMF: independent float) International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members.

RR: Freely floating.



Jordan



Political sketch

Formerly Palestine and Transjordan; officially today Hashemite Kingdom of Jordan. Independent from the United Kingdom on 22 March 1948.

Jordan shares much of its history with Israel. In 1516, the northern part of present-day Jordan fell under Ottoman Turkish rule. Later other parts of the country followed. They were administered from Damascus. During the First World War, Arab forces desiring independence from the Ottoman Empire controlled much of present-day Jordan. However, the United Kingdom and France divided present-day Iraq, Israel, Jordan, Lebanon, and Syria between themselves as League of Nations mandates after the war, to the dismay of the Arabs. On 11 April 1921, the area now comprising Jordan (then known as the Transjordan) was established within the British mandate of Palestine. Abdullah ibn Husayn was installed by the British as Transjordan's emir (military commander).

Transjordan became an independent constitutional state in 1927, although the British mandate did not end and independence did not come until 22 March 1948. Jordan, as it was called from 3 April 1949, formally annexed the West Bank of the Jordan River in April 1950 after hostilities with the newly created state of Israel had ceased in 1949. Abdullah, who had become Jordan's first king in 1946, was assassinated in 1951; his grandson Hussein ibn Talal became king in 1953, and Abdullah II, a son of Hussein, took over after Hussein died on 7 February 1999. Jordan remains a monarchy, though it has a parliament with limited powers. After the Six-Day War of June 1967, Israel occupied the West Bank. In 1970-1971 Jordan suffered a military conflict between the government and guerrillas of the Palestine Liberation Organization (PLO) based in Jordan. Government forces expelled the Palestine Liberation Organization. Jordan stayed out of the Arab-Israeli War of 1973 (Yom Kippur War) against Israel. In 1988 Jordan renounced its claims to the West Bank in favor of the Palestine Liberation Organization. In 1994 Jordan and Israel signed a full peace agreement. Jordan's major exports are fertilizers and vegetables.



Wars since 1500

Mamluk-Ottoman War of 1516-1517; Ottoman-Druze War of 1611-1613; First World War in the Middle East, 1914-1917 (Ottoman Empire against United Kingdom and France); Second World War in the Middle East, 1941 (United Kingdom against Germany and Vichy France); Arab-Israeli War of 1948-1949 (Israel against Egypt, Transjordan [now Jordan], Syria, and Lebanon); Palestinian Guerilla Raids, c. 1960-1993; Six-Day War, 1967 (Israel against Egypt, Jordan, and Syria); Arab-Israeli War of 1973 (Yom Kippur War) (Israel against Egypt and Syria; Jordanian units fought on Syrian soil); Jordanian Civil War (Black September), 1970-1971.



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Palestine, including what are today Israel, Jordan, the West Bank, and the Gaza Strip, became part of the sterling are 21 September 1939, soon after the start of the Second World War. Exchange controls were introduced with its entry into the sterling area. Israel ceased to belong to the sterling area on 22 February 1948 because of the impending end of the British mandate for Palestine. Jordan joined the sterling area 1 July 1950 and left it 23 June 1972.



Other

Defaults on or restructurings of debt to the foreign private sector: 1989.

Banking crises: Intra Bank, a Lebanese bank with five branches in Jordan, filed 14 October 1966; third-largest bank failed August 1989, with some related problems lasting into 1990.

Frankel and Rose (1996) list of currency crashes: 1989.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Jones (1987), Kattan (1975), Konikoff (1946), Marashdeh (1995), Ottensooser (1955).



Monetary authorities: Jordan

Dates Type Name Legal basis Remarks
1904

-9 July 1915

central bank (with commercial banking functions and mainly private ownership) (as part of currency union) Ottoman piastre (issued by central bank Banque Ottomane Impériale [also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank] [headquarters Constantinople (now Istanbul), Turkey]) Ottoman Empire, Act of Concession of the Imperial Ottoman Bank, 4 February 1863 Jordan was part of the of Ottoman Empire. The branch of the Ottoman Bank circulating notes used in Jordan was in Jerusalem. The first coins were issued around 70 BC.
10 July 1915

-December 1917

government issue alongside central bank (with commercial banking functions and mainly private ownership) (as part of currency union) Ottoman government alongside Banque Ottomane Impériale (also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank) (headquarters for both Constantinople [now Istanbul], Turkey) Ottoman Empire, Act No. 207, 12 April 1915 The Ottoman government issued notes (evrak- nakdiye) following the Ottoman Empire's entry into the First World War.
December 1917

-31 October 1927

dollarization Egyptian pound (issued by central bank National Bank of Egypt [headquarters Cairo, Egypt]) United Kingdom, Army, proclamation by commander (General Allenby), 23 November 1917 The British introduced the Egyptian pound upon conquering was is now Jordan during the First World War. Egypt was a British protectorate. The first bank was Barclays Bank (Dominion, Colonial and Overseas) (headquarters London, England), in Amman, in late 1921 or so; the branch closed 18 months later. The second bank was the Banque Ottomane Impériale (also called Imperial Ottoman Bank or Osmanl Bankas.; nicknamed the Ottoman Bank) (headquarters Istanbul, Turkey), in Amman, November or December 1925.
1 November 1927

-30 June 1950

joint currency board Palestine Currency Board (headquarters London, England) United Kingdom, Palestine Currency Order in Council, 7 February 1927; Palestine, Currency Notes Ordinance, April 1927; Jordan, some sort of decision of mid or late 1927 The British established a currency board to gain seigniorage for Palestine. The board also served Transjordan (now Jordan) and what later became the Gaza Strip. Transjordan decided to join just before the board began circulating a currency. The board was reduced to Jordan and the Gaza Strip when Israel introduced its own currency on 17 August 1948.
1 July 1950

-30 September 1964

own currency board Jordan Currency Board (headquarters London, England / Amman, Jordan from 1 October 1957) Jordan, Temporary Law for Jordan Currency, 1949 The rump of Palestine Currency Board became the Jordan Currency Board. Palestine Currency Board notes ceased to be legal tender on 30 September 1950; coins, on 30 July 1951. The Gaza Strip, which became part of Egypt, switched to using the Egyptian pound. Jordan joined the IMF on 29 August 1952.
1 October 1964

-present

central bank Bank al-Markaz al-Urdun (Central Bank of Jordan) (headquarters Amman, Jordan) Jordan, Central Bank of Jordan Law, published 14 February 1959; Central Bank of Jordan (Amendment Law) of 1960, ratified early 1962 Established a central bank following the prevailing view about the desirability of central banking.



Exchange rate arrangements: Jordan

Dates Arrangement Legal basis Remarks
1516

-December 1917

fixed; used Ottoman currency Ottoman rule began in present-day northern Jordan in 1516. The Ottoman pound was became a decimal currency in 1881.
December 1917

-31 October 1927

fixed; used Egyptian pound United Kingdom, Army, proclamation by commander (General Allenby), 23 November 1917; Palestine, Public Notice of 1 February 1921 The British introduced the Egyptian pound upon conquering Palestine during the First World War. The exchange rate was 1 gold Ottoman pound (lira) = Egyptian £0.8775. Egypt was a British protectorate at the time. The Egyptian pound was a decimal currency, divided into 1,000 millièmes.
1 November 1927

-20 September 1931

fixed (as part of currency union); Palestine £1 = UK£1 = 7.32238g gold United Kingdom, Palestine Currency Order, 7 February 1927; Palestine, Currency Notes Ordinance, April 1927 Introduced the Palestine pound. Banks completed the changeover of currency in a single day. The exchange rate was Palestine £1 = Egyptian £0.975. The Palestine pound was a decimal currency, divided into 1,000 mils. Egyptian currency and British gold sovereigns ceased to be legal tender after 31 March 1928 (Palestine, proclamation of 9 February 1928; proclamation of 29 February 1928).
21 September 1931

-30 June 1950

fixed (as part of currency union); Palestine £1 = UK£1 The United Kingdom abandoned the gold standard for the pound sterling on 21 September 1931, and the Palestine pound followed. Israel began issuing its own currency on 17 August 1948, ending the currency union with Transjordan (present-day Jordan plus the West Bank). The Palestine pound continued to circulate in the Gaza Strip, though.
1 July 1950

-1 October 1953

fixed, multiple rates; official rate 1 Jordanian dinar = UK£1 Jordan, Temporary Law for Jordan Currency, 1949 The Jordanian pound replaced the Palestine pound, reflecting the shrinkage of the currency board to the territory of Jordan alone. Like the Palestine pound, the Jordanian pound was a decimal currency. It was divided into 1,000 fils. "Dinar" is derived from the Latin denarius, an ancient Roman silver coin. For purposes of exchange control with countries outside the sterling area, there were differential exchange rates for officially permitted invisibles, and later for nonofficial imports and invisibles
2 October 1953

-6 January 1959

fixed, multiple rates; official rate 1 Jordanian dinar = UK£1 = US$2.80 = 2.248828g gold Jordan registered a gold parity with the IMF.
7 January 1959

-30 September 1964

fixed; 1 Jordanian dinar = UK£1 = US$2.80 = 2.248828g gold Effectively unified the exchange rate. Multiple rates persisted but were within +/-1% of the official rate, qualifying as a unified rate by the standards of the IMF.
1 October 1964

-17 November 1967

hard peg; 1 Jordanian dinar = UK£1 = US$2.80 = 2.248828g gold Replaced the currency board with a central bank.
18 November 1967

-23 August 1971

hard peg; 1 Jordanian dinar = US$2.80 = UK£1, 3 shillings 6 pence = 2.248828g gold Jordan, Council of Ministers, decision of 20 November 1967 Did not devalue with the pound sterling on 18 November 1967. The central bank suspended its dealings in foreign exchange on 17 August 1971 and resumed on 24 August 1971. Banks were allowed to continue their dealings.
24 August 1971

-7 May 1972

hard peg; 1 Jordanian dinar = US$2.80 = 2.248828g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Jordan ceased pegging to the pound sterling at the start of this period. It adopted wider margins on 29 December 1971 (Jordan, Council of Ministers, decision of 19 December 1971).
8 May 1972

-16 February 1973

hard peg; 1 Jordanian dinar = US$2.80 = 2.29184g gold (nominally) Devalued against gold. The US dollar was officially devalued against gold on 8 May 1972 in accord with the devaluation in practice of 18 December 1971.
17 February 1973

-21 February 1975

hard peg; 1 Jordanian dinar = US$3.1111 = 2.29184g gold (nominally) Jordan, Council of Ministers, decision of 28 February 1973 Did not follow the devaluation of the US dollar on 13 February 1973.
22 February 1975

-31 March 1978

hard peg; 0.387 Jordanian dinar = 1 SDR = 2.29184g gold (nominally) Switched to the SDR as the anchor currency, at the prevailing cross rate with the US dollar.
1 April 1978

-14 October 1988

hard peg; 0.388 Jordanian dinar = 1 SDR (0.387754 Jordanian dinar = 1 SDR from 1985) International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members. Sometime in 1978 and in 1985, Jordan made changes to the exchange rate so slight I do not qualify them as appreciations or depreciations. In the 1980s, the currency was allowed at times to fluctuated beyond margins of +/-2.25% around the official rate. The exchange rate with US dollar at end of this period was 0.378 Jordanian dinar = US$1, or approximately 1 Jordanian dinar = US$2.65.
15 October 1988

-8 February 1989

managed float (IMF: hard peg, 0.387754 Jordanian dinar = 1 SDR) The central bank ceased providing foreign exchange to the market as of 13 October 1988. The central bank annual report for 1989 describes the exchange rate as a managed float, although the IMF classifies it differently.

RR: Freely falling / de facto crawling band of +/-5% around US dollar. Premium in parallel market.

9 February 1989

-30 May 1989

hard peg; 0.540 Jordanian dinar = US$1 Repegged to the US dollar.

RR: Freely falling / de facto crawling band of +/-5% around US dollar. Premium in parallel market.

31 May 1989

-30 July 1989

basket (IMF: hard peg to SDR) Switched the anchor to the basket of currencies comprising the SDR, but with weights reflecting the importance of the constituent currencies in Jordan's international transactions.

RR: De facto crawling band of +/-5% around US dollar. Premium in parallel market.

31 July 1989

-16 February 1990

basket, dual rate (IMF: hard peg to SDR) Introduced a free rate for some transactions.

RR: De facto crawling band of +/-5% around US dollar. Premium in parallel market.

17 February 1990

-22 October 1995

basket (IMF: hard peg to SDR) Unified the exchange rate at an initial rate of 0.6729 Jordanian dinars = US$1. The central bank annual report says the parallel market virtually disappeared in 1991.

RR: De facto crawling band of +/-5% around US dollar to December 1992. Gap January-March 1993. De facto crawling peg to US dollar March 1993-August 1995. Parallel market premiums nil after 1992.

23 October 1995

-present

in practice, hard peg, US$1.43 = 1 Jordanian dinars, or 0.709 Jordanian dinar = US$1; officially, basket (IMF: hard peg to SDR) The exchange rate with US dollar had been nearly stable since 1991. Here the central bank adopted narrow margins (0.708-0.710 Jordanian dinars = US$1), rather than the wider margins that it had adopted since 29 December 1971. Central bank annual reports acknowledge that the exchange rate was in fact pegged to the US dollar.

RR: De facto peg to US dollar September 1995-December 2001, when data end.



Kazakhstan



Political sketch

Independent from the Union of Soviet Socialist Republics on 16 December 1991.

Over the centuries, different parts of Kazakstan were part of various Central Asian empires, including those of the Mongols. In the mid-1400s, many Uzbeks moved under Mongol auspices into what is now Kazakstan, where they became known as Kazak (meaning independent or vagabond) Uzbeks. From 1488 to 1518 they controlled virtually the entire steppe region. However, smaller groups tended to split from the main group. In the 1600s the Kazak khanate was further weakened by wars with the Oyrat people. Russian advances from the north, at first believed to be an aid against the Oyrats, led to Russian domination by 1848. Under Russian rule, many Russians settled in Kazakhstan. The Kazaks were not major participants in the civil wars that followed the fall of the Russian monarchy in 1917. In 1919-20 the Soviet Red Army occupied Kazakhstan, which in 1920 became part of the Kyrgyz Autonomous Republic. In 1925 the Soviet government changed the republic's name to the Kazakh Autonomous Soviet Socialist Republic. Soviet rule was as brutal in Kazakhstan as elsewhere. After 1927 the Soviet government began forcing the nomadic Kazaks to settle on collective and state farms, and the Soviets continued the tsarist policy of encouraging large numbers of Russians and other Slavs to settle in the region. Owing to intensive misguided agricultural development starting in the 1950s and its use as a testing ground for nuclear weapons, serious environmental problems developed by the late 1900s.

Kazakhstan became independent on 16 December 1991, following the collapse of the Union of Soviet Socialist Republics. Its only president so far (to 2004) has been the dictator Nursultan Nazarbayev, who continued to maintain close relations with Russia. Kazakhstan has large reserves of oil and other minerals, which are its main exports.



Wars since 1500

Conquests of Ivan the Terrible, 1552-1581; Dzungar Invasion of 1723; Dzungar Invasion of 1730s or so; Revolts against Russian rule in 1790s; Russian Invasion of 1860s; Kazakh Rebellion of 1916.



Convertibility

The Union of Soviet Socialist Republics (USSR) established a monobank system in early 1918, soon after the Bolshevik Revolution. It established a two-tier banking system in 1988 as a step away from central planning. The two-tier system was the basis of the national banking systems that former Soviet republics established after the USSR dissolved in late 1991, with the local branch of the State Bank of the USSR typically becoming the new national central bank. The Bank of Russia became the successor to the State Bank of the USSR as the issuer of the ruble. Former Soviet republics used the Russian ruble and were part of the ruble zone until they established their own national currencies. Some countries established coupon currencies as a temporary step, while others proceeded directly to full-fledged currencies. Cash rubles (paper money) were uniform throughout the former USSR, but noncash rubles (deposits) in various republics exchanged at varying rates against one another and against cash in the free or black market. On 24 July 1993, Russia announced that Soviet and Russian notes issued before 1993 would become invalid as of 26 July. In Russia, the period for exchanging notes issued before 1993 lasted until 31 August 1993. Russia's demonetization of notes issued before 1993 notes marked the end of attempts to keep the former USSR largely intact as a ruble zone. In some former Soviet republics, Soviet and Russian notes issued before 1993 remained legal tender for a time even though they had ceased to be legal tender in Russia.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Problems in the transition to a market economy 1991-1995.

Frankel and Rose (1996) list of currency crashes: Kazakhstan not included.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Fridman (1974), Kalyuzhnova (1997).



Monetary authorities: Kazakhstan

Dates Type Name Legal basis Remarks
16 December 1991

-14 November 1993

dollarization Russian ruble (issued by central bank Gosudarstvennyi Bank Soyuz Sovetskikh Sotsialisticheskikh Respublik [Gosbank] [State Bank of the USSR] / Bank Rossii [Central Bank of Russia] from 20 December 1991 [headquarters for both Moscow, Russia]) Part of Russia and later the Union of Soviet Socialist Republics to 15 December 1991. Kazakhstan used the Russian ruble as an interim currency after becoming independent. The Kazakhstan branch of Gosbank began functioning as the National Bank of Kazakhstan, but did not issue notes and coins and influenced only the so-called noncash circuit of transactions, which affected state enterprises and not consumers. Unlike some other former Soviet republics, Kazakhstan never issued coupons as an interim currency.
15 November 1993

-present

central bank Qazagstan lttyq Bankï (National Bank of Kazakhstan) (headquarters Almaty, Kazakhstan / Astana, Kazakhstan from 1999?) Kazakhstan, Law "On the National Bank of the Republic of Kazakhstan," 13 April 1993

The National Bank assumed full-fledged central banking powers and introduced a national currency to break away from Russia's highly inflationary monetary policy of the time. Kazakhstan joined the IMF on 15 July 1992.


Exchange rate arrangements: Kazakhstan

Dates Arrangement Legal basis Remarks
16 December 1991

-14 November 1993

fixed; used Russian ruble, multiple rates Kazakhstan became independent on 16 December 1991 and continued to use the Russian ruble temporarily. The Russian ruble was a decimal currency since 1704.

RR: Freely falling / freely floating.

15 November 1993

-15 July? 1996

Kazakh tenge, managed float, multiple rates (IMF: independent float) Kazakhstan, presidential decree "On Introduction of the National Currency of the Republic of Kazakhstan," 12 November 1993 Introduced a national currency at an initial rate of 1 Kazakh tenge = 500 Russian rubles, or 4.68 Kazakh tenge = US$1, but floating thereafter. Exchanges were limited to 100,000 pre-1993 Russian ruble notes per person. The tenge became sole legal tender on 18 November 1993. "Tenge" is derived from a Sanskit word meaning "stamped coin." The tenge is a decimal currency.

RR: Freely falling / freely floating to June 1996. From June 1996-December 2001, when data end, de facto crawling band of +/-2% around US Dollar.

16 July? 1996

-present

managed float (IMF: independent float, reclassified as managed float 31 December 1997, reclassified as independent float from 5 April 1999, reclassified as managed float 30 September 2000, loose inflation targeting) The exact date of the end of multiple rates is unclear. The start of this period is when Kazakhstan accepted Article VIII of the IMF Articles of Agreement. Kazakhstan has had a loose form of inflation targeting since at least 1999.



Korea, North



Political sketch

Also known as the Democratic People's Republic of Korea. Independent in a split of Korea on 9 September 1948.

Before 1945, see Korea, South and pre-1945 united. At the end of the Second World War, Japan surrendered Korea, which had been a Japanese colony. The Union of Soviet Socialist Republics (USSR), which had entered the war against Japan on 8 August 1945, only a week before the war ended, was given the administration of the country north of the 45th Parallel; the United States was given the administration of the southern part of the country. The United States did not want a unified communist Korea and the USSR did not want a united capitalist Korea. On 9 September 1948, soon after the Republic of Korea had been established in the south, the northern zone became the communist Democratic People's Republic of Korea under the dictatorship of Kim Il Sung. North Korean troops invaded South Korea on 25 June 1950, beginning the Korean War. United Nations troops, consisting chiefly of U.S. soldiers, came to the aid of South Korea. Chinese soldiers reinforced the North Korean army, which was also supplied with equipment by the USSR. After bloody fighting that claimed more than 2.5 million lives and left the division of the country approximately as it had been before the war, an armistice was signed on 27 July 1953. Kim Il Sung remained in power until his death on 8 July 1994; his son, Kim Jong Il, succeeded him. Kim Il Sung transformed Korea into one of the most militarized and repressive countries in the world, centered on a cult of his personality. North Korea's autarkic, centrally planned economy has been unable to provide even subsistence for all its people: as many as 2 million North Koreans have died in famines since 1994. The government has used famine as a political weapon to kill whole regions of people whose loyalty to the regime is suspected to be weak. North Korea has chosen to devote considerable resources to developing nuclear weapons, and as of 2004 claimed it had such weapons.



Wars since 1500

For united Korea, see Korea, South and pre-1945 united. Independent North Korea's only war has been the Korean War, 1950-1953 (North Korea and China, supported by Union of Soviet Socialist Republics, against South Korea, United States, and allies).



Convertibility

North Korea's currency has always had strict exchange controls; as of 2004 they may be the strictest in the world.



Other

Defaults on or restructurings of debt to the foreign private sector: 1980.

Banking crises: None, although by the late 1990s the economy was in deep trouble. Information is quite scarce.

Frankel and Rose (1996) list of currency crashes: North Korea not included.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Bank of Korea (1994, 2000), K. S. Kim (1995), P. Y. Kim (1995).



Monetary authorities: Korea, North

Dates Type Name Legal basis Remarks
15 August 1945

-5 December 1947

central bank (with commercial banking functions) (as part of currency union) Han'guk Chosun (Bank of Chosun, or Chosen, or Korea) (headquarters Seoul, Korea) Japan, Bank of Chosun [or Chosen] Act, 1 August 1911 Before this period, North and South Korea were united; see the table for South Korea for details. During the period, the Bank of Chosun continued to operate after Japan's surrender and withdrawal from Korea following the Second World War. North Korea issued its first coins in 1959.
6 December 1947

-present

monobank Chung-ang Un-haeng Cho-sun Min-ju-ju-i In-min Kong-hwa-guk (Central Bank of the People's Democratic Republic of Korea) (headquarters Pyongyang, North Korea) North Korea established a central bank and national currency separate from those of South Korea. It had nationalized banks in August 1946. North Korea is the largest country in existence today that has never belonged to the IMF.



Exchange rate arrangements: Korea, North

Dates Arrangement Legal basis Remarks
15 August 1945

-5 December 1947

fixed; used Korean won (as part of currency union) Before this period, North and South Korea were united; see the table for South Korea for details. After the Second World War ended, they continued to have a unified currency until their ideological differences became acutely apparent. The Korean won was a decimal currency whose first modern decimal coins had been issued in 1882.
6 December 1947

-1958

North Korean won, managed float, multiple rates A currency exchange and confiscation from 6-12 December 1947 exchanged old Japanese-era currency for North Korean won at rates varying from 1-to-1 to 10-to-1. The Korean word "won" is based on the same Chinese character as the word for the (Japanese) yen, meaning "circle."
1958

-16 February 1959

hard peg, multiple rates (controlled); 1 North Korean won = 1 Soviet ruble Officially became attached to the Soviet currency bloc.
17 February 1959

-31 December 1960

hard peg, multiple rates (controlled); 0.30 new North Korean won = 1 Soviet ruble Introduced a new currency from 13-17 February 1959 at 1 new North Korean won = 100 old North Korean won. No currency confiscation occurred.
1 January 1961

-October 1974

hard peg, multiple rates (controlled); 1.33 North Korean won = 1 new Soviet ruble no action by North Korea The Union of Soviet Socialist Republics redenominated its currency at 10 old Soviet rubles = 1 new Soviet ruble and devalued the ruble, for purposes of foreign trade only, from 10 old Soviet rubles = US$2.50 to 1 new Soviet ruble = US$1.10. The nominal cross rate against the US dollar remained 1.20 North Korean won = US$1. There was also a noncommercial rate of 1.44 North Korean won = 1 Soviet ruble for the ruble area and another noncommercial rate of 2.57 North Korean won = US$1 for transactions with capitalist countries.
October 1974

-1990

managed float, multiple rates (controlled) Apparently the former rate of 1.33 North Korean won = 1 Soviet ruble continued to apply, but did not have the same significance for North Korea's foreign trade. Old currency was exchanged for new, redesigned currency without limit at 1-to-1 from 7-12 April 1979.
1990

-present

hard peg, multiple rates (controlled); official rate 0.97 North Koran won = US$1 A currency confiscation occurred on 15 July 1992, as old currency was again exchanged for new currency at 1-to-1 from 15-20 July 1992. Up to 399 North Korean won could be exchanged in cash. Amounts of 400-30,000 North Korean won could be deposited into bank accounts not immediately available for withdrawal, while amounts over 30,000 North Korean won were not accepted. A trade rate of 2.15 North Korean won = US$1 began in 1988. There have been de facto devaluations from that rate to 150 North Korean won = US$1 on 1 August 2002 and to 900 North Korean won = US$1 in August? 2003.



Korea, South and pre-1945 united



Political sketch

Also known as the Republic of Korea. Independent in a split of Korea on 15 August 1948

Korea has long been the center of struggles for power between China and Japan. The Choson dynasty (also called the Lee or Yi dynasty) ruled from 1392 until the Japanese annexation of Korea in 1910. For much of that time it paid tribute to China. In 1592 the Japanese military leader who had just reunified Japan tried to conquer Korea. Japanese forces were successful on land but the Koreans controlled the seas. China dispatched troops to aid Korea. The Japanese withdrew in 1592, but invaded again in 1597 and withdrew in 1599 after the death of the Japanese monarch in 1598. In 1627 the Manchu overran northern Korea, withdrawing after Korea granted certain concessions. In 1636 the Manchu captured Seoul. In 1644 they established the Ch'ing dynasty in China, and Korea paid tribute to them. Like China and Japan, Korea for a long period purposely isolated itself from contact with the outside. In 1876 Japan forced Korea open to trade with a squadron of warships. China, worried about Japanese intentions, stationed troops in Korea and obtained a treaty opening Korea to Chinese commerce. As a counterweight, Korea also signed treaties of commerce with several Western powers. A modernization movement began. In 1884, modernizing radicals seized power, but were overthrown by Chinese troops after three days. This led in 1885 to the signing of the Li-Ito Convention, designed to guarantee a Sino-Japanese balance of power on the Korean peninsula. Slavery was not abolished until 1894, though it had been in decline.

On the heels of a rebellion in Korea in 1894, Japan and China went to war over which country would have Korea in its sphere of influence. Japan defeated China, and under the Treaty of Shimonoseki in April 1895, China recognized Japanese hegemony in Korea. In October 1895 Japan engineered the assassination of Korea's queen. During the Russo-Japanese War (1904-1905) Korea at first declared neutrality, but under Japanese pressure allowed Japan to use its territory for military operations against Russia. Japan defeated Russia, and by the Treaty of Portsmouth (September 1905), Russia recognized Japanese hegemony in Korea. In November 1905, Japan forced the Korean emperor to sign a treaty making Korea a Japanese protectorate. On 29 August 1910 Japan annexed Korea. On 1 March 1919, nationwide anti-Japanese rallies were held. Japan forcibly repressed protest. Resentment against Japanese rule smoldered and occasionally thereafter broke out in new protests. In 1931 Japan used Korea as its base to invade Manchuria. After the outbreak of the Sino-Japanese War in 1937 and of the Second World War in the Pacific in December 1941, Japan attempted to obliterate Korea as a nation. Koreans were forced to worship at Japanese Shinto shrines and even to adopt Japanese-style names, and academic societies devoted to Korean studies as well as newspapers and magazines published in Korean were banned. Koreans were drafted to work as Japanese soldiers and laborers.

After Japan ended the Second World War by surrendering on 2 September 1945, Korea was divided into two zones of occupation. The Union of Soviet Socialist Republics (USSR), which had entered the war against Japan on 8 August 1945, only a week before the war ended, was given the administration of the country north of the 45th Parallel; the United States was given the administration of the southern part of the country. The United States did not want a unified communist Korea and the USSR did not want a united capitalist Korea. On 3 September 1948, the northern zone became the communist Democratic People's Republic of Korea under the dictatorship of Kim Il Sung. North Korean troops invaded South Korea on 25 June 1950, beginning the Korean War. United Nations troops, consisting chiefly of U.S. soldiers, came to the aid of South Korea. Chinese soldiers reinforced the North Korean army, which was also supplied with equipment by the USSR. After bloody fighting that claimed more than 2.5 million lives and left the division of the country approximately as it had been before the war, an armistice was signed on 27 July 1953. After the war South Korea rebuilt with U.S. aid. A military coup occurred in May 1961. In the mid 1960s South Korea began an economic takeoff that made it one of the great economic success stories of the late 1900s. Korea's economic policy involved extensive government support for large industrial combines (chaebol). Competitive, democratic elections were first held again in December 1987, and over the next several years the country cast off the vestiges of military rule. In 1997 South Korea was hit hard by the East Asian financial crisis, but it rebounded quickly.



Wars since 1500

These apply also to North Korea: Mongol Invasions of Korea, 1231-1241; Japanese Conquest of Korea, 1592-1599; Manchu Conquest of Korea, 1627; Manchu Invasion of Korea, 1636; Korean Rebellions of 1811-1812; Korean Peasant Rebellions of 1862; French Incursion into Korea, 1866; U.S. Capture of Kanghwa Island, 1871; Tonghak Uprising, 1894; Sino-Japanese War of 1894-1895 (Japan conquered Korea); Russo-Japanese War of 1904-1905 (fought by Russia and Japan in and around Korea); Samil Independence Movement, 1919-1920 (against Japan); Second World War in the Pacific, 1941-1945 (Japan against United States, United Kingdom, Netherlands, China, and allies, including the Union of Soviet Socialist Republics just before the war ended); Korean Occupation Rebellion, 1946 (against United States); Ysu Rebellion, 1948 (against United States); Korean War, 1950-1953 (North Korea and China, supported by Union of Soviet Socialist Republics, against South Korea, United States, and allies); Kwanju Massacre, 1980 (of protestors against the military regime).



Convertibility

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

South Korea established exchange controls on 15 August 1948,when it became independent. It removed most restrictions 1 January 2001.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: A premodern financial crisis in 1872 as a result of government-created inflation (no banks existed at the time); problems in mid 1980s, as nonperforming loans reached 7% of total by 1986; banks accounting for almost 20% of assets nationalized or closed 1997-past 1999 (related to East Asian currency crisis).

Frankel and Rose (1996) list of currency crashes: None, but affected by East Asian currency crisis, 1997-1998.

No data for united Korea or North Korea in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Bank of Korea (1994, 2000), Cole and Park (1983), Daiichi Gink (1909), Palais (1974).



Monetary authorities: united Korea (to 14 August 1945)

Dates Type Name Legal basis Remarks
1279?

-1368?

government issue Chinese Yüan dynasty (headquarters Dadu [also called Khanbalik--now Peking], China) During the period of the Mongol conquest of China and Korea, paper money of the Yüan dynasty circulated. The first coins were issued in 996.
1368?

-1390

used cloth and grain as money government of Korea (headquarters Gaesong [or Kaesong], [now North] Korea) Apparently notes ceased to circulate when the Yüan dynasty came to an end in China.
1390

-1392

government issue government of Korea (headquarters Gaesong [or Kaesong], [now North] Korea) The Kory dynasty issued notes toward the end of its existence.
1392

-April 1401

coins only government of Korea (headquarters Seoul, [now South] Korea) The Kory dynasty fell from power and issuance of paper money ceased.
April 1401

-1403

government issue government of Korea (headquarters Seoul, [now South] Korea) Notes were in limited use.
1403

-1410

used cloth and grain as money government of Korea (headquarters Seoul, [now South] Korea) There was a fall in the value of paper money and of cloth (which was widely used as money), and people lost faith in them.
1410

-1537

government issue government of Korea (headquarters Seoul, [now South] Korea) Notes were in limited use. There may have been episodes during this period when notes ceased to be used, such as starting in 1425; however, the record seems unclear.
1537

-1620

used cloth and grain as money government of Korea (headquarters Seoul, [now South] Korea) Palais (1975: 161) says paper money probably went out of circulation sometime around 1537, when a law provided for payment of cloth instead of paper money for military taxes. The monetary history of this period seems sketchy, and there may have been periods when coins rather than cloth and grain were widely used.
1620

-19 May 1902

coins only (see Remarks concerning free banking around 1900) government of Korea (headquarters Seoul, [now South] Korea) Korea, military cloth receipt law (kunjok sup'obp), 1537 Palais (1975: 161) says paper money probably went out of circulation sometime around 1537, when a law provided for payment of cloth instead of paper money for military taxes. In 1867 the government briefly issued high-value token coins. First modern bank Dai-Ichi Ginko (Daiichi Gink) (headquarters Tokyo, Japan), in Pusan, 1878. The bank issued custom house notes in treaty ports for the Korean government starting 1884. Second modern bank Dai Juhachi Ginko (meaning Eighteenth Bank, headquarters Nagasaki, Japan), in Pusan, sometime in this period. Around 1900 there were also some private issues of paper money, but these do not seem to have been extensive enough to qualify as an episode of free banking.
20 May 1902

-9 November 1909

private monopoly issue Dai-Ichi Ginko (Daiichi Gink) (headquarters Tokyo, Japan) Japan, Ministry of Finance, granted approval sometime in 1901 or early 1902 for note issue The Japanese bank Dai-Ichi Ginko was given a monopoly during a period of increasing Japanese influence in Korea. In January 1905 its notes were recognized as legal tender (related legislation was Japan, Ordinance No. 73, March 1905).
10 November 1909

-14 August 1945

central bank (with commercial banking functions) Han'guk Unhaeng? (Bank of Korea) / Han'guk Chosun or Chosen Ginko (Bank of Chosun, or Chosen, or Korea, or Khankuku) from 1 August 1911 (headquarters for both Seoul, Korea) Emperor of Korea and Japanese Resident General, Agreement on the Establishment of a Korean Central Bank, July 1909; Japan, Bank of Chosun [or Chosen or Korea] Act, 1 August 1911 Korea received its own central bank, which took over the government business of Dai-Ichi Kangyo Bank. The statute of bank was revised later as Japanese control of the country became complete. Chosun was the name for what foreigners now call Korea; it was the name of the country during the Lee (Yi) dynasty (1392-1910).



Monetary authorities: South Korea

Dates Type Name Legal basis Remarks
15 August 1945

-11 June 1950

central bank (with commercial banking functions) (as part of currency union to 5 December 1947) Han'guk Chosun (Bank of Chosun, or Chosen, or Korea) (headquarters Seoul, Korea) Japan, Bank of Chosun [or Chosen] Act, 1 August 1911 The Bank of Chosun continued to operate after Japan's surrender and withdrawal from Korea following the Second World War. On 6 December 1947, North Korea established a central bank and national currency separate from those of South Korea.
12 June 1950

-present

central bank Han'guk Unhaeng (Bank of Korea) (headquarters Seoul, South Korea) Republic of Korea, Bank of Korea Act, No. 138[recheck-see WWW site?], 5 May 1950 The commercial banking functions of the Bank of Chosun were spun off and merged with the Mutual Aid Bank into the Bank of Commerce and Industry (headquarters Seoul, South Korea). South Korea joined the IMF on 26 August 1955.



Exchange rate arrangements: united Korea (to 14 August 1945)

Special remark: I have relied mainly on Palais (1974) for an account of Korea's exchange rate history before 1900. Some parts of that history remain murky. I welcome comments from knowledgeable readers.

Dates Arrangement Legal basis Remarks
996

-early 1000s

iron "cash" coins The government minted iron "cash" coins and prohibited use of hemp cloth as a medium of exchange. The prohibition proved unworkable and Koreans were allowed to continue using cloth and grain as media of exchange in market transactions.
early 1000s

-1097

used cloth and grain Coins seem to have fallen into disuse.
1097

-early 1100s

silver "jar money" (unbyng) The government revived metallic currency, and issued copper cash coins minted in 1102.
early 1100s

-1279?

used cloth and grain Korea reverted to cloth and grain as the main media of exchange.
1279?

-1368?

clean? float A period of paper money issued by Yüan dynasty after the Mongol conquest of Korea.
1368?

-1390

used cloth and grain Apparently notes ceased to circulate when the Yüan dynasty came to an end in China.
1390

-1392

clean? float The Kory dynasty issued government notes toward the end of its existence.
1392

-April 1401

used cloth and grain The Kory dynasty fell from power and issuance of paper money ceased.
April 1401

-1403

clean? float Government notes were in limited use.
1403

-1410

used cloth and grain There was a fall in the value of paper money and of cloth (which was widely used as money), and people lost faith in them.
1410

-1537

clean? float Notes were in limited use. There may have been episodes during this period when notes ceased to be used, such as starting in 1425; however, the record seems unclear.
1537

-1620

used cloth and grain Palais (1975: 161) says paper money probably went out of circulation sometime around 1537, when a law provided for payment of cloth instead of paper money for military taxes. The monetary history of this period seems sketchy, and there may have been periods when coins rather than cloth and grain were widely used.
1620

-1627

used copper cash and silver The government established a rigid exchange rate of copper in terms of silver. Copper cash was minted starting in 1625 and then, with interruptions, frequently afterwards.
1627

-1633?

used cloth and grain The first Manchu invasion of Korea resulted in a suspension of the use of metallic currency.
1633

-1636

copper cash and silver In 1633, the government for the first time issued a copper coin with the inscription "ever-normal circulating treasure."
1636

-by 1640s

used cloth and grain The second Manchu invasion resulted in a suspension of the use of metallic currency.
by 1640s

-1656

copper cash and silver Resumed use of coins.
1656

-1660s

used cloth and grain Korea, royal order of 1656 The king issued an order prohibiting the use of copper cash. Landowning aristocrats viewed coins and wealth gained in merchant activities as a threat to their social status.
1660s

-1678

copper cash and silver Minting by the government resumed. Private parties also minted coins.
1678

-1678 or 1679

hard peg; 400 copper mun = 1 silver yang The government set a ratio between copper cash and silver. The official rate overvalued copper mun (cash) coins.
1678 or 1679

-1680

hard peg; 200 copper mun = 1 silver yang The government revalued copper cash. The market rate, however, was 800 copper mun = 1 silver yang.
1680

-14 January 1867

used copper cash and silver The government abandoned attempts to set exchange rate for cash in terms of silver. In the 1700s, copper cash became the main medium of exchange, and silver was held mainly as a reserve currency. From the early 1700s to the early 1800s, the weight of copper coins was reduced by about 50%. In 1731, the government minted a large issue of cash coins and Korea in effect adopted monetary exchange irrevocably, despite the misgivings of some rulers and other influential people. In 1751, the minting of coins changed from an irregular to an annual activity. In 1825, 1829, and 1830 the metallic value of cash coins was 92%, 73%, and 73%, respectively, of its legal tender value. Private mints, which existed with royal permission, were forbidden in 1864. The historical information on this period in Palais (1974) is limited.
15 January 1867

-1869

clean? float Korea, declaration of state council, 7 January 1867 Circulation of 100-cash coins began 15 January 1867 and the coins were minted until 16 June 1867. The metallic value of these coins was only 5-7% of their legal tender value, a rare instance of a high-value token coin. An inflation of 400-500% resulted. The 100-cash coin was withdrawn from circulation in 1869, as a result of a royal edict apparently of the 10th lunar month of 1868.
1869

-21 January 1874

used Chinese and local copper cash, and silver After the episode of the 100-cash coins, Chinese cash, having a metallic value of half of Korean cash, was imported and passed as equal to Korean cash. The Korean government imported some of the Chinese cash coins. The result was an inflation in the 1870s.
22 January 1874

-20 May 1905

used local copper cash and silver A royal edict of 22 January 1874 ordered Koreans to cease using Chinese cash as a way of combating inflation. Because Chinese cash was a large percentage of currency in circulation and of government treasury reserves, the edict created a recession. The first modern decimal coins were issued in 1882.
1 June 1905

-15 September 1917

hard peg; 1 Korean won = 0.75g gold = 1 Japanese yen Korea, imperial edict of 1905 Korea adopted a gold standard on the recommendation of the Japanese financial advisor. Japan was on the gold standard. The Korean word "won" is based on the same Chinese character as the word for (Japanese) yen, meaning "circle."
16 September 1917

-14 August 1945

hard peg; 1 Korean won = 1 Japanese yen Japan abandoned the gold standard during the First World War; Korea, as its colony, followed. From my sources, it is unclear whether Korea re-established a direct link between the Korean won and gold when Japan later returned to the gold standard, or whether Korea was henceforth on a pure Japanese yen exchange standard.



Exchange rate arrangements: South Korea

Dates Arrangement Legal basis Remarks
15 August 1945

-October 1945

hard peg (as part of currency union); 1 Korean won = 1 Japanese yen South Korea remained under Japanese control for a short period after Japan surrendered to end the Second World War.
October 1945

-14 July 1947

hard peg (as part of currency union); 15 South Korean won = US$1 Switched to the US dollar as the anchor currency at the prevailing official cross rate.

RR: De facto band of +/-5% around US dollar. Parallel market premium reached 2,400% in 1947.

15 July 1947

-30 September 1948

hard peg (as part of currency union to 5 December 1947); 50 South Korean won = US$1 Devalued. On 6 December 1947, North Korea established a central bank and national currency separate from those of South Korea.

RR: De facto band of +/-5% around US dollar.

1 October 1948

-13 June 1949

hard peg; 450 South Korean won = US$1 A large devaluation.

RR: Freely falling / de facto band of +/-5% around US dollar / parallel market from December 1948.

14 June 1949

-30 April 1950

hard peg, dual rate; 450 South Korean won = US$1 Established a second rate of 900 South Korean won = US$1 for nongovernment transactions.

RR: Freely falling / de facto band of +/-5% around US dollar / parallel market.

1 May 1950

-31 October 1950

hard peg; 1,800 South Korean won = US$1 Devalued and reunified exchange rate.

RR: Freely falling / de facto band of +/-5% around US dollar / parallel market

1 November 1950

-31 March 1951

hard peg; 2,500 South Korean won = US$1 First devaluation of Korean War.

RR: Freely falling / de facto band of +/-5% around US dollar / parallel market

1 April 1951

-14 February 1953

hard peg; 6,000 South Korean won = US$1 Another wartime devaluation.

RR: Freely falling / de facto band of +/-5% around US dollar / parallel market

15 February 1953

-14 December 1953

hard peg; 60 South Korean hwan =US$1 Established a new currency at 1 South Korean hwan = 100 South Korean won.

RR: De facto crawling band of +/-2% around US dollar / parallel market.

15 December 1953

-October 1954

hard peg; 180 South Korean hwan = US$1 Devalued again half a year after the end of the Korean War.

RR: De facto crawling band of +/-2% around US dollar.

October 1954

-14 August 1955

hard peg, dual rate; official rate 180 South Korean hwan = US$1 Established a dual exchange rate. IMF data start here.

RR: De facto crawling band of +/-2% around US dollar to December 1954. From January 1955, freely falling / de facto crawling band of +/-2% around US dollar. Parallel market premium around 350%.

15 August 1955

-30 April 1957

hard peg, multiple rates; official rate 500 South Korean hwan = US$1 Devalued and introduced multiple rates. However, the official rate applied to all transactions other than certain US aid items. South Korea never registered a gold parity with the IMF.

RR: Freely falling / de facto crawling band of +/-2% around US dollar to December 1955. From January 1956, de facto crawling band of +/-2% around US dollar. Parallel market premium above 100%.

1 May 1957

-27 August 1958

hard peg; 500 South Korean hwan = US$1 Replaced multiple exchange rates with a sale of government bonds.
28 August 1958

-22 February 1960

hard peg, multiple rates; official rate 500 South Korean hwan = US$1 Replaced the bond auction with an exchange tax of 150 South Korean hwan per US dollar plus other, varying taxes reflecting the auction rate of the US dollar.
23 February 1960

-31 December 1960

hard peg, multiple rates; official rate 650 South Korean hwan = US$1 Republic of Korea, Monetary Board, decision of 22 February 1960 Devalued.

RR: De facto crawling band of +/-2% around US dollar. Parallel market premium ranged from 20-120% through 1965.

1 January 1961

-1 February 1961

hard peg; 1,000 South Korean hwan = US$1 Republic of Korea, Monetary Board, decision of December 1960 Devalued and unified the exchange rate.

RR: De facto crawling band of +/-2% around US dollar. Parallel market premium ranged from 20-120% through 1965.

2 February 1961

-9 June 1962

soft peg, dual rate; base rate 1,250 South Korean hwan = US$1 To the base rate there was added a varying premium, initially 20 South Korean hwan per US dollar.

RR: De facto crawling band of +/-2% around US dollar. Parallel market premium ranged from 20-120% through 1965.

10 June 1962

-2 May 1964

soft peg, dual rate; base rate 125 South Korean won = US$1 Republic of Korea, emergency currency measures, 9 June 1962 Introduced a new currency at 1 South Korean won = 10 South Korean hwan. There was no currency confiscation, but there was a temporary freeze of deposits.

RR: De facto crawling band of +/-2% around US dollar. Parallel market premium ranged from 20-120% through 1965.

3 May 1964

-18 December 1964

hard peg; 255 South Korean won = US$1 Simplified the exchange rate. The parallel rate was in practice inoperative.

RR: Crawling band of +/-5% to US dollar. Parallel market premiums mostly in single digits.

19 December 1964

-21 March 1965

soft peg, multiple rates; floor 255 South Korean won = US$1 Introduced export subsidies of 3-25 South Korean won per US dollar.

RR: Crawling band of +/-5% to US dollar. Parallel market premiums mostly in single digits.

22 March 1965

-2 August 1972

managed float, dual rate; floor 255 South Korean won = US$1 Abolished export subsidies and replaced them with foreign exchange certificates. This period included an abrupt depreciation in the exchange rate on 26 June 1971, from 328.25 South Korean won = US$1 to 370.80 South Korean won = US$1. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. South Korea had never registered a gold parity with the IMF. The IMF source reports that South Korean resumed a flexible exchange rate policy on 3 December 1971, but in practice fluctuations seem to have ben small.

RR: Crawling band of +/-5% to US dollar. Parallel market premiums mostly in single digits.

3 August 1972

-6 December 1974

hard peg; 400 South Korean won = US$1 Republic of Korea, President, Emergency Decree for Economic Stability and Growth 3 August 1972 Devalued.

RR: To April 1974, crawling band of +/-5% to US dollar. Parallel market premiums mostly in single digits. From May 1974, pegged to US dollar.

7 December 1974

-11 January 1980

hard peg; floor 480 South Korean won = US$1 The market rate changed from 399 South Korean won = US$1 to 484 South Korean won = US$1.
12 January 1980

-26 February 1980

hard peg; 580 South Korean won = US$1 Devalued the "base rate" (also called the standard concentration rate) from its previous value of 484 South Korean won = US$1.

RR: Parallel market premium rose to 28% in February 1980.

27 February 1980

-1 March 1990

basket (loose) Switched to a basket as part of the policy mix determining the exchange rate. On 1 September 1989, banks were allowed to set their bid and ask rates for US dollar within +/-0.4% of the Bank of Korea's rate, whereas before they had been required to set their rates at the edges of the +/-0.4% spread, thus permitting no real competition (Republic of Korea, government announcement of 1 September 1989).

RR: De facto crawling peg to US dollar (apparently; there is either a typographical error or a gap in coverage here after July 1980).

2 March 1990

-15 December 1997

crawling peg to US dollar (IMF: managed float) Republic of Korea, government announcement of 1 September 1989 Introduced a "market average exchange system" allowing fluctuations of up to +/-0.4% versus the previous day's weighted average exchange rate with the US dollar. Widened the daily permissible fluctuation to +/-0.6% 2 September 1991, +/-0.8% 1 July 1992, +/-1% 1 October 1993, +/-1.5% 1 November 1994, +/-2.25% 1 December 1995, and +/-10% 20 November 1997 (during the East Asian currency crisis).

RR: Crawling band around US dollar to 30 October 1994. De facto drawling peg to US dollar from 1 November 1994.

16 December 1997

-present

managed float (IMF: independent float) Republic of Korea, Letter of Intent with International Monetary Fund, 24 December 1997 Floated during the East Asian currency crisis after a speculative attack on the currency. Although the agreement with the IMF was not signed until 24 December 1997, the South Korean government had already agreed to elements of it earlier, including a floating exchange rate.

RR: Freely falling to June 1998. Freely floating July 1998-December 2001, when data end.



Kuwait



Political sketch

Independent from the United Kingdom on 19 June 1961.

In the early 1700s, the 'Anizah tribe of central Arabia searched for better pasture and water. They founded Kuwait City around 1710. The first sheik of the Sabah family, which still rules Kuwait, assumed that position in 1756. In the late 1800s, Germany sought to extend the Berlin to Baghdad railway to the port of Kuwait. To thwart both German and Ottoman influences, the United Kingdom and Kuwait made an agreement in 1899 that gave Britain control of Kuwait's foreign affairs. Following the outbreak of the First World War 1914, Britain established a protectorate over Kuwait. Relations with Najd (later Saudi Arabia) were settled by the Treaty of al-Uqayr (1922), which involved the creation of the compromise Neutral Zone. The northern frontier with Iraq was agreed upon in 1923. Oil was discovered in Kuwait in 1938; before that, fishing, pearl diving, agriculture, and livestock herding were the most important local industries. Pearl diving was an important local industry until the 1930s, when the Japanese began producing cultivated pearls at far less cost of recovery than naturally occurring pearls. By the 1970s there was so much oil wealth that, despite domestic spending that gave Kuwait one of the highest standards of living in the world, enough wealth was left over for the government to build up a large portfolio of foreign investments.

Kuwait became independent from the United Kingdom on 19 June 1961. Iraq claimed that Kuwait belonged to it, but dropped the claim after the British sent troops to defend Kuwait and the Arab League recognized Kuwait's independence on 20 July 1961. During the Iran-Iraq war that began in 1980, Kuwait sided tacitly with Iraq. But after talks on the repayment of Iraq's war debts to Kuwait and other issues broke down, Iraqi forces conquered Kuwait on 2 August 1990. The Kuwaiti government escaped and took refuge in Saudi Arabia, while Iraqi forces looted Kuwait. The United Nations approved a U.S.-led trade embargo against Iraq in an effort to force it out of Kuwait, and on 29 November 1990 the United Nations approved the use of force against Iraq. After a month-long aerial bombardment of Iraq, a U.S.-led military coalition operating from Saudi Arabia drove Iraqi forces out of Kuwait from 23-27 February 1991. Kuwait's exiled rulers returned to their capital city several weeks later. The Iraqis had destroyed nearly half of Kuwait's oil wells, but Kuwait eventually restored oil production to prewar levels. Kuwait remains a monarchy.



Wars since 1500

First World War in the Middle East, 1914-1917 (Ottoman Empire against United Kingdom and France); Second World War in the Middle East, 1941 (United Kingdom against Germany and Vichy France; Iraq was sympathetic to Germany); Persian Gulf War, 1990-1991 (Iraq against United States, Saudi Arabia, Kuwait, and allies).



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Kuwait was part of the sterling area, but after it established its own currency, its capital controls were relatively minor, and were aimed at preventing capital flight from the sterling area through the local market rather than protecting the Kuwaiti dinar. During that period, Hong Kong was the other place in the sterling area where there existed a local market through which capital flight out of the sterling area was possible. Kuwait left the sterling area on 23 June 1972. It had already abolished exchange controls 18 July 1972. On 24 March 1991, after the Gulf War and the restoration of its exiled government, Kuwait limited withdrawals for transfer into foreign currency to 4,000 Kuwaiti dinars per month except for approved purposes. It removed the limits 3 August 1991.



Other

In the states of the Arabian Peninsula, gold and silver coins, particularly gold British sovereigns and silver Maria Theresa thalers, continued to be widely used into the 1960s even after local note currencies and coins were established.

The Indian rupee was widely used in the countries of the Persian Gulf and Arabian Peninsula in the early and mid 1900s (and in some cases even earlier). The government of India established a separate currency, the Gulf rupee, for circulation exclusively outside the country (India, Reserve Bank of India [Amendment] Act, 1 May 1959). In doing so, the government hoped to reduce the drain on its foreign reserves from gold smuggling with the countries of the Persian Gulf. After India devalued the rupee on 6 June 1966, the countries using the Gulf rupee--Oman, Qatar, and what are now the United Arab Emirates--decided to replace the Gulf rupee with national currencies. Kuwait had already done so in 1961, and Bahrain had done so in 1965.

Defaults on or restructurings of debt to the foreign private sector: None.

Government provided relief for loan losses related to the 1990 Iraqi invasion (Kuwait, Decree Law No. 32, 11 May 1992).

Banking crises: An estimated 40% of loans nonperforming by 1986; government provided assistance to financial system 1992 after Persian Gulf War.

Frankel and Rose (1996) list of currency crashes: Kuwait not included.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Jones (1987), Presley and Wilson (1991).



Monetary authorities: Kuwait

Dates Type Name Legal basis Remarks
28 February 1942

-31 May 1959

dollarization Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India]) Kuwait, Banking Agreement between the Shaikh of Kuwait and the Imperial Bank of Iran, 18 December 1941 The first bank was the Imperial Bank of Iran (later British Bank of the Middle East) (headquarters London, England), in Kuwait City, on 28 February 1942. It was granted a 15-year monopoly of banking. The second bank was perhaps the Eastern Bank (headquarters London, England), in Kuwait City, possibly in 1957. The first coins were issued in 1887.
1 June 1959

-31 March 1961

dollarization (another type) Indian-issued Gulf rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India) India, Reserve Bank of India (Amendment) Act, 1 May 1959 India issued special rupee notes for use around the Persian Gulf to reduce the drain on its foreign reserves from gold smuggling with the Gulf states.
1 April 1961

-31 March 1969

currency board Majlis al-Naqd al-Kuwayt (Kuwait Currency Board) (headquarters Kuwait City, Kuwait) Kuwait, Kuwait Currency Law, Amiri Decree No. 41, 19 October 1960; Government notice, Kuwait Al-Youm (government gazette), No. 317, 5 March 1961 Kuwait established its own monetary authority to accompany its impending independence. Kuwait joined the IMF on 13 September 1962.
1 April 1969

-1 August 1990

central bank Bank al-Kuwayt al-Markaz (Central Bank of Kuwait) (headquarters Kuwait City, Kuwait) Kuwait, Law Concerning Currency, The Central Bank of Kuwait and the Organization of Banking Business, No. 32, 30 June 1968 Established a central bank in accord with the monetary theory of the time favoring central banking.
2 August 1990

-26 February? 1991

dollarization (under occupation) used Iraqi dinar (issued by central bank Bank al-Markaz al-'Irq [Central Bank of Iraq] [headquarters Baghdad, Iraq]) Period of Iraqi occupation during the Persian Gulf War.
27 February? 1991

-present

central bank Bank al-Kuwayt al-Markaz (Central Bank of Kuwait) (headquarters Kuwait City, Kuwait) Kuwait, Law Concerning Currency, The Central Bank of Kuwait and the Organization of Banking Business, No. 32, 30 June 1968 Kuwait restored its previous monetary institutions after Iraq suffered defeat in the Gulf War and ended its occupation.



Exchange rate arrangements: Kuwait

Dates Arrangement Legal basis Remarks
about 1900?

-31 May 1959

fixed; used Indian rupee Kuwait became a British protectorate in 1899. The Indian rupee seems to have come into circulation about this time. Previously, trade was conducted in gold or silver coins, including the Indian rupee and Maria Theresa thaler, and such coins remained widely used in trade until perhaps the 1960s. The Indian rupee became a decimal currency on 1 April 1957.
1 June 1959

-31 March 1961

fixed; used Indian-issued Gulf rupee India, Reserve Bank of India (Amendment) Act, 1 May 1959 India issued special rupee notes for use around the Persian Gulf to reduce the drain on its foreign reserves from gold smuggling with Gulf states.
1 April 1961

-17 November 1967

fixed; 1 Kuwaiti dinar = UK£1 = 2.48828g gold Kuwait, Kuwait Currency Law, Amiri Decree No. 41, 19 October 1960; government notice, Kuwait Al-Youm (government gazette), No. 317, 5 March 1961 Kuwait introduced a national currency. "Dinar" is derived from the Latin word denarius, an ancient Roman silver coin. The Kuwaiti dinar was a decimal currency, divided into 1,000 fils. Though subject to the exchange rate regulations of the sterling area, Kuwait had a free market in US dollars (where US dollars traded at fluctuating exchange rates). Kuwait registered a gold parity with the IMF on 26 April 1963.
18 November 1967

-31 March 1969

fixed; 1 Kuwaiti dinar = UK£1-1/6 = US$2.80 = 2.48848g gold Kuwait, Kuwait Currency Board, decision of 18 November 1967 Did follow the devaluation of the pound sterling on 18 November 1967.
1 April 1969

-22 August 1971

hard peg; 1 Kuwaiti dinar = UK£1-1/6 = US$2.80 = 2.48848g gold Kuwait, Law Concerning Currency, The Central Bank of Kuwait and the Organization of Banking Business, No. 32, 30 June 1968 Kuwait replaced its currency board with a central bank, so the exchange rate changed from fixed to pegged.

RR: Trivial parallel market premium.

23 August 1971

-20 December 1971

hard peg; 1 Kuwaiti dinar = UK£1-1/6 = 2.48848g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. The Kuwaiti dinar remained pegged to pound sterling, so it in effect unpegged from the US dollar and began to appreciate against US dollar.

RR: Trivial parallel market premium.

21 December 1971

-23 June 1972

hard peg; 1 Kuwaiti dinar = UK£1-1/6 = US$3.04 = 2.48848g gold (nominally) Repegged to the US dollar after the United States devalued the dollar against gold on 18 December 1971. The pound sterling remained the anchor currency.

RR: Trivial parallel market premium.

24 June 1972

-14 February 1973

hard peg; 1 Kuwaiti dinar = US$3.04 = 2.48848g gold (nominally) Unpegged from the pound sterling after the United Kingdom floated it on 23 June 1972.
15 February 1973

-17 March 1975

hard peg; 1 Kuwaiti dinar = US$3.37778 = 2.48848g gold (nominally) Central Bank of Kuwait, announcement of 15? February 1972 Did not follow the devaluation of the US dollar against gold on 13 February 1973. Adopted wider margins.
18 March 1975

-31 March 1978

basket; 1 Kuwaiti dinar = 2.48848g gold (nominally) Central Bank of Kuwait, announcement of 17 March 1975 Switched to a weighted basket of currencies as the anchor. The basket consisted of the currencies of major trade and financial partners. The content and weighting of the components were apparently undisclosed.

RR: De facto moving peg to US dollar.

1 April 1978

-8 April 1984



basket International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members.

RR: De facto moving peg to US dollar.

9 April 1984

-August 1984

basket, dual rate Introduced a second, depreciated rate for capital transfers and undocumented current-account payments.

RR: De facto moving peg to US dollar.

August 1984

-1 August 1990

basket Unified the exchange rate.

RR: De facto moving peg to US dollar.

2 August 1990

-26 February? 1991

fixed; used Iraqi dinar Period of Iraqi occupation during the Persian Gulf War.

RR: De facto moving peg to US dollar.

27 February? 1991

-4 January 2003

officially, basket; in practice, band of approximately 1 Kuwaiti dinar = US$3.30 since November 1992 Kuwait restored it previous monetary arrangements after Iraq suffered defeat in the Persian Gulf War and ended its occupation.

RR: De facto moving peg to US dollar to December 2001, when data end.

5 January 2003

-present

band; 0.29963 Kuwaiti dinars = US$1, +/-3.5% Officially established a band to the US dollar.



Kyrgyz Republic



Political sketch

Formerly Kyrgyzia and Kyrgystan. Independent from the Union of Soviet Socialist Republics on 31 August 1991.

Like other Central Asian regions, Kyrgyzia was largely nomadic before being incorporated into Russia in 1876. Also like them, it was later heavily settled by Russians in an attempt to suppress the nationalist movement. Kirgiziya became an autonomous oblast (province) within the Union of Soviet Socialist Republics (USSR) in 1924, and it was made the Kyrgyz Soviet Socialist Republic in 1936. It declared its independence on 31 August 1991 when the USSR was breaking up. It assumed the name Kyrgyzstan, and on 5 May 1993 became the Kyrgyz Republic. The Kyrgyz Republic is landlocked and has modest natural resources, factors that have hampered its economic development. Its president from independence to today (2004) has been Askar Akayev, who has shown undemocratic tendencies as he has extended his stay in power.



Wars since 1500

Oyrat Invasion of Kyrgystan, 1685; Manchu Conquest of Turkestan, 1758; Kokand Conquest of Kyrgystan, 1710-1754; Kokand Rebellion, 1874 (against Russia); Kyrgyz Revolt of 1916.



Convertibility

The Union of Soviet Socialist Republics (USSR) established a monobank system in early 1918, soon after the Bolshevik Revolution. It established a two-tier banking system in 1988 as a step away from central planning. The two-tier system was the basis of the national banking systems that former Soviet republics established after the USSR dissolved in late 1991, with the local branch of the State Bank of the USSR typically becoming the new national central bank. The Bank of Russia became the successor to the State Bank of the USSR as the issuer of the ruble. Former Soviet republics used the Russian ruble and were part of the ruble zone until they established their own national currencies. Some countries established coupon currencies as a temporary step, while others proceeded directly to full-fledged currencies. Cash rubles (paper money) were uniform throughout the former USSR, but noncash rubles (deposits) in various republics exchanged at varying rates against one another and against cash in the free or black market. On 24 July 1993, Russia announced that Soviet and Russian notes issued before 1993 would become invalid as of 26 July. In Russia, the period for exchanging notes issued before 1993 lasted until 31 August 1993. Russia's demonetization of notes issued before 1993 notes marked the end of attempts to keep the former USSR largely intact as a ruble zone. In some former Soviet republics, Soviet and Russian notes issued before 1993 remained legal tender for a time even though they had ceased to be legal tender in Russia.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Four small commercial banks closed 1995, 80-90% of loans in banking system doubtful.

Frankel and Rose (1996) list of currency crashes: Kyrgyz Republic not included.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Odling-Smee and others (1993).



Monetary authorities: Kyrgyz Republic

Dates Type Name Legal basis Remarks
31 August 1991

-9 May 1993

dollarization Russian ruble (issued by central bank Gosudarstvennyi Bank Soyuz Sovetskikh Sotsialisticheskikh Respublik [Gosbank] [State Bank of the USSR] / Bank Rossii [Central Bank of Russia] from 20 December 1991 [headquarters for both Moscow, Russia]) Became independent from the Union of Soviet Socialist Republics on 31 August 1991, but continued to use Russian ruble as a temporary currency. Kyrgystan joined the IMF on 8 May 1992.
10 May 1993

-present

central bank Natsionalnya Bank Kyrgyzskaya Respubliki or Kyrgyzstan Banky (National Bank of the Kyrgyz Republic) (headquarters Bishkek, Kyrgyz Republic) Kyrgyz Republic, Law "On the National Bank of the Kyrgyz Republic," No. 1055-XII, 12 December 1992 The Kyrgyz Republic introduced a national currency to signal its independence.



Exchange rate arrangements: Kyrgyz Republic

Dates Arrangement Legal basis Remarks
31 August 1991

-9 May 1993

fixed; used Russian ruble Became independent from the Union of Soviet Socialist Republics on 31 August 1991, but continued to use the Russian ruble as a temporary currency. The Russian ruble was a decimal currency sinc 1704.

RR: Freely falling / managed float.

10 May 1993

-present

Kyrgyz som, managed float (IMF: independent float, reclassified as managed float 1995) Kyrgyz Republic, Law on the National Bank of the Kyrgyz Republic, No. 1055-XII, 12 December 1992 Introduced a national currency at 1 Kyrgyz som = 200 Russian rubles = US$0.25 initially, floating thereafter. The central bank has pursued loose inflation targeting since 1999. "Som" comes from a Chuvash word meaning "payment." The Kyrgyz som is a decimal currency.

RR: Freely falling / managed float to November 1999. From December 1999-December 2001, when data end, de facto crawling band of +/-2% around US dollar.



Laos



Political sketch

Independent from France on 22 October 1953.

In the 1300s the first Laotian state, Lan Xang, was established with the help of the Khmer king. Except for rule by Burma from 1574-1637, the Lan Xang kingdom ruled Laos until 1713, when it split into three separate kingdoms: Vien Chan (now Vientiane), Champassak, and Luang Prabang. In the 1700s these three kingdoms became vassal states to Siam. In the 1800s Vien Chan tried to break free of Siamese influence by uniting with Vietnam, but it was defeated and became a Siamese province. In the late 1800s France gained control of all Siamese territory east of the Mekong River as part of its expansion into Indochina. A treaty of 3 October 1893 between Siam (Thailand) and France demarcated the boundary between Laos and Thailand and in effect made Laos a French protectorate. On 26 September 1940, the Japanese occupied French Indochina, but left the Vichy French administration in place. In December 1940 Thailand tried to seize Cambodian and Laotian territory, but French-led forces resisted. In March 1941 Japan brokered a peace in which Cambodia and Laos ceded land to Thailand, which Thailand returned in 1947. Japan deposed the French administration in Indochina on 9 March 1945. It declared the states of the region nominally independent but administered the region itself until the end of the Second World War in September 1945.

After the war, French rule was restored, but in 1946 France recognized a united Laos under the king of Luang Prabang. In 1949 a constitution was promulgated, and Laos was granted limited autonomy within the French Union. Laos became independent from France on 22 October 1953. The leftist Pathet Lao ("Land of the Lao") movement joined the Viet Minh of Vietnam in the First Indochina War against the French in the early 1950s. By the end of the war the Pathet Lao controlled a considerable portion of the country. The 1954 Geneva Conference established Laos as a buffer state between communist North Vietnam and Western-oriented Thailand (formerly Siam). During the 1950s, the Pathet Lao struggled with rightist and neutralist factions for control of Laos. A second Geneva Conference, in 1962, formed a neutral coalition government that included the Pathet Lao. For the rest of the decade Laos became increasingly involved in the war in Vietnam. Pathet Lao forces aligned themselves with North Vietnam and fought Laotian government forces for control of the country. In 1973 a cease-fire was signed, and the next year a Provisional Government of National Unity, composed of the Pathet Lao and rightists, was formed. In 1975, soon after the fall of the anticommunist regimes of Saigon and Phnom Penh, the Pathet Lao took control of the country, revealed the existence of a secret Laotian communist party. The king abdicated and the Pathet Lao established the Lao People's Democratic Republic on 2 December 1975. The communists imposed centralized economic planning with the usual dismal results. About 10 percent of the population fled the country. Laos maintained a close relationship with Vietnam during the 1980s, but Vietnamese influence diminished by the early 1990s, as did centralized economic planning. The country held its first election in 1989 and promulgated a new constitution in 1991. Laos remains a one-party state. It is poor and its economy is mostly agricultural.



Wars since 1500

Burmese-Laotian War of 1558; Burmese-Laotian War of 1564-1565; Burmese-Laotian War of 1571-1575; Burmese-Laotian War of 1581-1592; Siamese-Laotian War of 1826-1829; Siamese Invasion of Laos, 187; Japanese Occupation of Indochina, 1940-1945; French-Siamese War, 1940-1941; Second World War in the Pacific (Japan against United States, United Kingdom, Netherlands, China, and allies), 1941-1945; French Indochina War of 1946-1954; Laotian Civil War of 1954-1973; Laotian Guerilla War of 1977-1990.



Convertibility

Indochina prohibited imports of Mexican silver dollars (also known as pesos or piasters) a governor-general's decree of 3 June 1903. As a result of foreign demand for silver during the Russo-Japanese War, the export of Indochinese piastres was forbidden on 3 January 1905 by a decree of that date by the governor-general. A decree of 1 January 1917 forbade the sale of Indochinese coins at prices exceeding their nominal legal value. This occurred during a run-up in the price of silver against gold that peaked in 1920. The decree of 3 January 1905 was repealed by a decree of the governor-general of Indochina of 30 December 1919.

When the First World War began, France imposed a moratorium of payments on all negotiable instruments starting 1 August 1914. The moratorium was subsequently extended by decrees until 1 March 1915. The central bank, the Bank of France, abandoned the gold standard on 5 August 1914, although no official prohibition on exporting gold existed until by a decree of 3 July 1915, affirmed by a law of 15 November 1915. A decree of 2 April 1918 prohibited capital exports without authorization. A law of 25 June 1928 officially restored the gold standard and repealed exchange controls. When the French franc was an object of currency speculation , a law of 13 August 1936 imposed extensive exchange controls, supplementing some lesser measures that had been implemented in 1935.

France imposed exchange controls on 9 September 1939 by a decree of that date, after the Second World War broke out in Europe. The controls were promulgated in Indochina by a decree-law of 27 September 1939. On 20 May 1940 capital controls within the franc zone were greatly relaxed by a French decree of that date. Exchanges of mail between French Indochina and France were cut off after Japan started the Second World War in the Pacific in December 1941, although telegraph communications continued until November 1942. Communications resumed in August 1945, following Japan's surrender to end the war. Exchange controls within the franc zone were not removed until 6 June 1946. Afterwards, the CFA franc became convertible both for current- and capital-account transactions within the French franc zone (France, Monaco, French possessions, and countries using the CFA franc). Outside the French franc zone it became convertible for current-account transactions when France resumed current-account convertibility, but it was not convertible for capital-account transactions. France had multiple exchange rates from 26 January 1948 until 17 October 1948, and a dual exchange rate from 18 October 1948 to 29 September 1949. On 20 September 1949 it devalued the French franc and unified the exchange rate, taking advantage of the lead offered by the United Kingdom, which had devalued the pound sterling on 18 September 1949. Under French rule, Indochina (present-day Cambodia, Laos, and Vietnam) comprised a unified currency zone. When the countries of the region established national currencies, issued by national central banks, the unified currency zone broke apart. Except in North Vietnam, which rejected continued economic ties with France after independence, some special exchange control arrangements with France persisted for a time afterwards.

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Taiwan had the same capacity in Oceania, part of Indonesia, and perhaps also in the Philippines. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

Laos suspended the "free convertibility" of the Lao kip from 9 August 1960-5 January 1961 and from 5 January 1962-11 April 1962?



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Recapitalization of government-owned banks early 1990s.

Frankel and Rose (1996) list of currency crashes: 1976, 1980, 1985; also East Asian currency crisis, 1998.

In October 1940, shortly after Japanese forces had invaded French Indochina, Japanese forces brought with them Japanese military yen. Only a small amount of Japanese military yen was ever used in French Indochina, though; instead, the Japanese used local currency (Fujita 2003: 8).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Brahm (1992), Gang (1993 [1985]), Meuleau (1990).

Monetary authorities: Laos

Dates Type Name Legal basis Remarks
1893

-31 December 1951

private monopoly issue Banque de l'Indochine (headquarters Paris, France) France, decree of 21 January 1875 chartering Banque de l'Indochine France established influence over Laos in 1893, but the Banque de l'Indochine had no permanent presence in the country until it opened an agency in Vientiane in December 1953. The bank became the note-issuing bank for all French colonies in Asia and the Pacific. In 1931, during a period of leftist government, the French state gave itself a 20% share in the bank (France, law of 31 March 1931). The second bank was perhaps the Banque Franco-Chinoise (headquarters Paris, France), date unknown. The first coins were issued by 1700.
1 January 1952

-31 December 1954

joint monetary institute Institut d'Émission des États du Cambodge, du Laos et du Viêt-Nam (headquarters Phnom Penh, Cambodia) Accord de la Conférence inter-États, Pau, France, 29 November 1950, formalized as Convention [inter-États] sur l'Institut d'Émission, 23 December 1950; Conférence économique inter-États, Convention de Paris, 16 December 1951; France, Law No. 48-1482 and 48-1483, both 25 September 1948; France, Decree No. 51-1477, 28 December 1951 The Indochinese states, which by this time were on the road to independence, nationalized the note issue. They did so both because they desired it and because it agreed with French government policy from 1930s onward to nationalize note issue in French colonies. The monetary institute was required to hold a minimum reserve of 50% in foreign exchange. It had separate note designs for Cambodia, Laos, and Vietnam.
1 January 1955

-1976

central bank Thanakhan Heng Xat Lao (Banque Nationale du Laos or National Bank of Laos) (headquarters Vientiane, Laos) Four-Party Agreement of Paris, 29 December 1954; Laos, Ordonnance Royale No. 176, 11 July 1955; Ordonnance Royale No. 415 and 416, both 25 Dec. 1954; Central Bank Law, June 1990 Separate central banks in Cambodia, Laos, and Vietnam replaced the joint monetary institute as the newly independent countries distanced themselves from the French colonial era. Laos undertook an exchange of new notes for old from 29 September-25 October 1955. The central bank took over issuance of coins from the government at the start of this period. Laos joined the IMF on 5 July 1961.
1976

-1988

monobank Thanakhan Heng Xat Lao (Banque Nationale du Laos or National Bank of Laos) (headquarters Vientiane, Laos) Laos nationalized all banks in 1976 and adopted centralized economic planning.
1988

-present

central bank Thanakhan Heng Xat Lao (Banque Nationale du Laos or National Bank of Laos) / Thanakhan Heng Sathalanalat Paxathipatai Paxaxon Lao

(Bank of the Lao People's Democratic Republic) from 27 June 1990 (headquarters for both Vientiane, Laos)

Took steps back to a market economy.



Exchange rate arrangements: Laos

Dates Arrangement Legal basis Remarks
1893

-7 July 1895

hard peg (as part of currency union); 1 Indochinese piastre de commerce = 24.4935g silver = Mexican $1 (piaster) France, Ministre de la Marine et des Colonies, decision of 24 December 1878; French Indochina, governor-general's arrêté of 22 December 1885 Laos fell under French domination in 1893. France minted the decimalized piastre de commerce, equal to the Mexican silver peso (dollar, piaster) and the U.S. trade dollar. Test strikes of the piastre de commerce were made as early as 1879, but the first strikes intended for widespread circulation did not occur until 1884. The arrêté of 1885 made the piastre de commerce legal tender in French Indochina.
8 July 1895

-26 March 1920

hard peg (as part of currency union); 1 Indochinese piastre = 24.3g silver French Indochina, governor-general's decree of 8 July 1895 France reduced the silver content of the piastre slightly to discourage the export of piastre coins. Henceforth the coin was called simply the piastre, not the piastre de commerce. Importation of Mexican piasters was forbidden by French Indochina, governor-general's decree of 3 June 1903. In terms of the French franc, the Indochinese piastre reached its most depreciated level on 26 February 1902, 1.925 French francs.
27 March 1920

-29 December 1921

soft peg to French franc (as part of currency union) French Indochina, governor-general's agreement with the Banque de l'Indochine, 20 January 1920 As a result of the increase in the price of silver relative to gold, convertibility into silver was suspended. The Indochinese piastre was pegged to the French franc with periodic adjustments. I have not found the precise dates of the adjustments, but monthly rates of Indochinese piastres per French francs, as listed in the Annuaire Économique de l'Indochine, are as follows: March 1920: 14.48; April: 15.35; May: 12.64; June: 9.10; July: 8.85; August: 10.47; September: 10.83; October: 10.18; November: 10.33; December: 8.72; January 1921: 8.15; February: 6.68; March: 6.30; April: 6.80; May: 5.84; June: 5.94; July: 6.39; August: 6.46; September: 7.29; October: 7.90; November: 7.18.
30 December 1921

-30 May 1930

hard peg (as part of currency union); 1 Indochinese piastre = 24.3g silver Resumed convertibility into silver after the price of silver relative to gold fell. In terms of the French franc, the Indochinese piastre reached its most appreciated level in 1926, 27 French francs. On 9 January 1930 the governor-general of French Indochina asked the Banque de l'Indochine to maintain an exchange rate of 1 Indochinese piastre = 10 French francs. The bank did so beginning the next day.
31 May 1930

-1 October 1936

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs = 0.5895g gold France, decree of 31 May 1930 Switched to the French franc at the anchor currency, at approximately the prevailing cross rate with silver. The idea was to avoid further large fluctuations in exchange rate with the French franc, which at the time was on the gold standard.
2 October 1936

-January 1943

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs France, decree of 2 October 1936 Indochina severed its pegged exchange rate to gold when the French franc abandoned the gold standard on 2 October 1936.
January 1943

-late September 1945

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs (nominally), or 0.976 Indochinese piastre = 1 Japanese yen Japan and French Indochina, treaty of 6 May 1941? The French colonial government in Indochina was under Vichy control and nominally allied with Japan during the Second World War in the Pacific. The exchange rate with the Japanese yen was used in trade with Japan. Convertibility was limited. The prewar exchange rate with the Japanese yen had been about the same.
late September 1945

-25 December 1945

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs (nominally) Apparently Indochina returned to the prewar exchange rate with the French franc after the Japanese occupation ended, but during this period it seems that trade at the official rate was thin. A currency confiscation occurred on 17 November 1945 (French Indochina, High Commissioner's arrêté of 17 November 1945). To reduce inflation and deny notes to the Viet Minh rebels in northern Vietnam, 500-piastre notes issued under Japanese occupation (9 March-23 September 1945) were demonetized, most without compensation. Other notes had to be deposited and were blocked until 20 September 1946.
26 December 1945

-10 May 1953

hard peg (as part of currency union); 1 Indochinese piastre = 17 French francs Indochina, High Commissioner's federal ordinance of 25 December 1945; France, Decree No. 45-0135, 25 December 1945 France revalued the Indochinese piastre along with other French colonial currencies after the Second World War, reflecting a judgement that the colonies had come out of the war in relatively better condition than France. In the case of Indochina, though, the judgement was not warranted.
11 May 1953

-31 December 1954

hard peg (as part of currency union); 1 Indochinese piastre = 10 French francs France, Decree No. 53-399, 11 May 1953 France devalued the Indochinese piastre to its prewar parity to reduce budget deficits and counteract the fall in prices of key agricultural exports.

RR: Parallel market.

1 January 1955

-4 August 1957

hard peg; 1 Lao kip = 10 French francs Laos, apparently Ordonnance Royale No. 415 and No. 416, both 25 Dec. 1954; a decree of early 1955 Laos introduced a national currency at 1 Lao kip = 1 Indochinese piastre. An illegal but tolerated legal market existed. The kip was a decimal currency.

RR: Parallel market, multiple rates.

5 August 1957

-9 October 1958

hard peg; 1 Lao kip = 10 French francs or 35 kip = US$1 or 98 kip = UK£1 Laos, Ordonnance Royale No. 149, 5 August 1957 Established official exchange rates with US dollar and pound sterling so as not to make French franc the exclusive anchor.
10 October 1958

-31 December 1963

hard peg; 80 Lao kip = US$1 Laos, Arrêté Presidentiel No. 308, 9 October 1958; Ordonnance Royale of 10 January 1959 Switched to the US dollar as the anchor currency and devalued from old cross rate of 35 Lao kip = US$1 as part of a liberalization of exchange controls. A parallel market also existed and was tolerated; the central bank sometimes bought and sold foreign exchange in it. At the end of 1963, the parallel market rate was 600 Lao kip = US$1.
1 January 1964

-30 September 1964

hard peg, dual rate; official rate 240 Lao kip = US$1 Devalued the official exchange rate and introduced a floating free rate.

RR: Crawling band around US dollar.

1 October 1964

-2 April 1972

hard peg, multiple rates; official rate 240 Lao kip = US$1 Established a rate for purposes of customs valuation to 500 Lao kip = US$1. By 8 November 1971, the free market rate was 600 Lao kip = US$1. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Laos never registered a gold parity with the IMF. The governemnt closed the foreign-exchange market on 4 November 1971 and allowed it to reopen on 8 November 1971, after deprcating the "free market rate" from 505 Lao kip = US$1 to 600 Lao kip = US$1. The government's Foreign Exchange Operations Fund suspended operations on 24 March 1972 and rsumed on 4 April 1972.

RR: Crawling band around US dollar.

3 April 1972

-25 May 1972

hard peg; 600 Lao kip = US$1 Devalued and unified the exchange rate.

RR: Crawling band of +/-2% around US dollar; parallel market.

26 May 1972

-27 March 1973

hard peg, dual rate; official rate 600 Lao kip = US$1 Applied a tax of 40% to many foreign-exchange transactions.

RR: Crawling band of +/-2% around US dollar; parallel market.

28 March 1973

-30 March 1975

hard peg, multiple rates; official rate 600 Lao kip = US$1 Established a special subsidy rate for timber exports.

RR: Managed float.

31 March 1975

-14 June 1976

hard peg, dual rate; official rate 750 Lao kip = US$1 Devalued.

RR: Managed float.

15 June 1976

-30 April 1978

hard peg, multiple rates (controlled); official rate 200 Lao kip potpay (kip of liberation) = US$1 At an early stage of communist rule, introduced a new currency at 1 Lao "kip of liberation" = 20 old Lao kip. A currency confiscation occurred: the maximum amount of old currency allowed to be exchanged immediately was 100,000 old Lao kip for individuals and 1 million old Lao kip for businesses. The excess had to be deposited in a bank and was payid out at up to the equivalent of 100,000 old Lao kip per month.

RR: Managed float.

1 May 1978

-9 December 1979

hard peg (controlled); official rate 400 Lao kip potpoy (kip of liberation) = US$1 Applied a single exchange rate to all legal transactions.

RR: Managed float.

10 December 1979

-14 January 1980

hard peg, dual rate (controlled); official rate 16 Lao (new) kip = US$1 Introduced a new currency at 1 Lao new kip = 100 Lao kip potpoy (kip of liberation). Simultaneously established a second exchange rate of 24 new Lao kip = US$1.

RR: Managed float.

15 January 1980

-1985

hard peg, dual rate (controlled); official rate 10 Lao kip = US$1 Laos could revalue in this fashion because it was a centrally planned economy where the exchange rate did not reflect market forces. By 1982, all official transactions were occurring at the preferential rate of 35 Lao kip = US$1.

RR: Managed float.

1985

-31 March 1988

hard peg, multiple rates (controlled); official rate 10 Lao kip = US$1 By this time, the official rate was used only for certain accounting purposes. Laos introduced multiple rates sometime in 1985, but the IMF source does not specify the date.

RR: Managed float.

1 April 1988

-30 June 1988

soft peg; 350 Lao kip = US$1 Apparently Laos unified its exchange rate, but the main text and the appendix of the IMF source seem to disagree on this.

RR: Managed float to April 1988. Freely floating / crawling band of +/-2% around US dollar / dual market from May 1988.

1 July 1988

-31 August 1988

soft peg; 375 Lao kip = US$1 Devalued. The rate listed is the buying rate; the selling rate was 380 Lao kip = US$1.

Freely floating / crawling band of +/-2% around US dollar / dual market.

1 September 1988

-31 October 1988

soft peg; 435 Lao kip = US$1 Devalued. The rate listed is the buying rate; the selling rate was 440 Lao kip = US$1.

Freely floating / crawling band of +/-2% around US dollar / dual market.

1 November 1988

-April 1989

crawling peg; 450 Lao kip = US$1 This marks the start of frequent devaluations whose dates are not always listed in the IMF source.

Freely floating / crawling band of +/-2% around US dollar / dual market.

April 1989

-March 1992

crawling peg (IMF: managed float) related legislation is Laos, Council of Ministers, resolution "On management of rates of exchanges between kip and foreign currencies," 19 July 1989 Devalued the buying rate in several stages from 450 Lao kip = US$1 on 1 January 1989 to 710 Lao kip = US$1 on 29 December 1989; apparently, devaluations occurred in every month of 1989 except March (no action) and December (a slight revaluation). In September 1990, the kip was used for all domestic transactions.

RR: Freely floating / crawling band of +/-2% around US dollar / dual market to May 1990.

March 1992

-30 August 1995

officially, managed float; in practice, hard peg, dual rate, official rate 717 Lao kip = US$1 until May 1995 The official rate stabilized at a spread of 716-718 Lao kip = US$1. There was a second, floating, rate. In May 1995 the official rate began to depreciate.

RR: From June 1990, crawling band of +/-2% around US dollar; dual market.

31 August 1995

-29 September 1995

crawling peg, dual rate Transitional arrangement whereby the leading commercial bank set an official exchange rate close to the rate in the parallel market.
30 September 1995

-about 31 December 1996

managed float (IMF: independent float) Floated and unified the exchange rate. The Thai baht and US dollar were also widely used for payments, though they were not legal tender.

RR: Crawling band of +/-2% around US dollar; parallel market to December 1996. From January 1997-March 2000, freely falling / Crawling band of +/-5% around US dollar / dual market. From April 2000-December 2001, when data end, crawling band of +/-2% around US dollar, using a 24-month window.

about 1 January 1997

-present

managed float, dual rate (IMF: independent float, reclassified as managed float 31 March 1997) By January 1997, a significant gap opened between the official exchange rate and the parallel market rate.



Lebanon



Political sketch

Independent from France on 26 November 1941.

In 1516 Lebanon, previously part of the Mamluk state of Syria and Egypt, became part of the Ottoman empire. It retained a substantial Christian population. A breakaway ruler allied with Egypt, which was only nominally part of the Ottoman Empire, established dominance from 1832 to 1840, but the Ottoman Empire retook Lebanon and Syria after pressure from European powers against Egypt. After an 1860 massacre of Christians by Druzes (also spelled Druses), a heretical Islamic sect, France intervened in behalf of the Christians. The intervention forced the Ottoman sultan to form an autonomous province within the Ottoman Empire for the mountainous Christian area, known as Mount Lebanon. In the dismemberment of the Ottoman empire following the First World War, Lebanon came under French rule. It became a League of Nations mandate under France, like its neighbor Syria. France established the present boundaries for Lebanon on 1 September 1920. France established certain common institutions for Lebanon and Syria, but tension existed between the two mandates because Lebanon was majority Christian, whereas Syria was majority Muslim.

During the Second World War, German-allied Vichy France controlled Lebanon and Syria. In June and July 1941, British and Free French forces invaded from Palestine and Iraq. An armistice of 14 July 1941 signed at Acre resulted in the Free French government in exile taking control of Lebanon and Syria. On 26 November 1941, the Free French general in charge of Lebanon and Syria and Syria declared them independent. However, French troops and French influence remained until 1945. Lebanon's government functioned according to an unwritten agreement of 1943, called the National Pact, which reserved certain political positions for Christians, Sunni Muslims, and Shiite Muslims. The Christians exerted the greatest power under this system. Lebanon became a functioning democracy and prospered as a major financial and cultural center of the Middle East. In 1958 Lebanon's Muslims, aware that their population was growing faster than that of the Christians, rebelled but were suppressed by the government with the aid of U.S. troops.

Following the Arab-Israeli War of 1948-1949, several hundred thousand Palestinian refugees resettled in camps in southern Lebanon. In 1970 the Palestine Liberation Organization (PLO) transferred its military activities and headquarters to Lebanon after it had been driven out of Jordan. In the early 1970s the PLO launched raids across the border into northern Israel, and in response the Christian-dominated Lebanese government tried to curb it. The PLO shifted its support to Lebanon's Muslims in the intensifying conflict between Christians and Muslims. (Although most Palestinians are Muslims, some are Christians.) By 1975 this conflict had degenerated into a civil war. As the Christians began to lose the civil war, Syria, concerned that Israel would intervene, sent 20,000 troops into Lebanon to prevent destruction of the Christian community. From 1976-1982 several thousand Syrian troops and a multinational United Nations force tried to maintain peace between Christians, Muslims, Palestinians, and Israelis. In June 1982 Israeli forces invaded Lebanon with the intent of driving the Palestinian forces out of southern Lebanon. Israel withdrew in 1985 without having achieved its goal. The country remained divided into warring blocs of Maronite Christians, Sunnite and Shiite Muslims, Palestinian guerrillas, and Druzes. An agreement of 1989 marked the beginning of the end of the civil war. Syrian troops, allegedly peacekeepers, took over the country and made it a de facto colony of Syria. They remain today (2004). The Lebanese government is a fragile democracy. The econonomy continues to have an important financial sector that serves an international clientele.



Wars since 1500

Ottoman-Druze War of 1585; Ottoman-Druze War of 1611-1613; Ottoman-Druze War of 1631-1635; Siege of Acre, 1799 (by France); Conquests of Bashir II, 1832; First World War in the Middle East, 1914-1918 (Ottoman Empire against United Kingdom and France); Druze Rebellion, 1925-1927; Second World War in the Middle East, 1941 (United Kingdom versus Vichy French administration of Lebanon and Syria); Arab-Israeli War of 1948-1949 (Israel against Egypt, Transjordan [now Jordan], Syria, and Lebanon); Lebanese Civil War of 1958; Palestinian Guerilla Raids, about 1960-1993 (on Israel); Jordanian Civil War of 1970-1971; Lebanese Civil War of 1975-1990 (resulted in Syrian occupation, which continues to 2004).



Convertibility

When the First World War began, France imposed a moratorium of payments on all negotiable instruments starting 1 August 1914. The moratorium was subsequently extended by decrees until 1 March 1915. The central bank, the Bank of France, abandoned the gold standard on 5 August 1914, although no official prohibition on exporting gold existed until by a decree of 3 July 1915, affirmed by a law of 15 November 1915. A decree of 2 April 1918 prohibited capital exports without authorization. A law of 25 June 1928 officially restored the gold standard and repealed exchange controls. When the French franc was an object of currency speculation , a law of 13 August 1936 imposed extensive exchange controls, supplementing some lesser measures that had been implemented in 1935.

France imposed exchange controls on 9 September 1939 by a decree of that date, after the Second World War broke out. On 20 May 1940 capital controls within the franc zone were greatly relaxed by a French decree of that date. Exchanges between French West Africa and France were cut off from the time of the Allied invasion of French Morocco and Algeria in November 1942 to about September 1944, by which time the Allies had liberated Paris and the main French port cities. Exchange controls within the franc zone were not removed until 6 June 1946. Afterwards, the CFA franc became convertible both for current- and capital-account transactions within the French franc zone (France, Monaco, French possessions, and countries using the CFA franc). Outside the French franc zone it became convertible for current-account transactions when France resumed current-account convertibility, but it was not convertible for capital-account transactions. France had multiple exchange rates from 26 January 1948 until 17 October 1948, and a dual exchange rate from 18 October 1948 to 29 September 1949. On 20 September 1949 it devalued the French franc and unified the exchange rate, taking advantage of the lead offered by the United Kingdom, which had devalued the pound sterling on 18 September 1949.

Lebanon and Syria formed a joint exchange-control zone on 3 December 1939 (Haut Commissariat de la République Française au Syrie et au Liban, Arrêtés No. 336/LR-348/LR, 3 December 1939). Lebanon imposed certain foreign exchange controls on 12 June 1940 through an Office des Changes (Foreign Exchange Office) (Lebanon, Arrêté No. RL152, 12 June 1940). Communications between France and the Middle East were interrupted from June 1941 to 1944. On 15 July 1941, the day after the Armistice of Acre between the Vichy French forces and the Allies (United Kingdom and Free French forces), Lebanon and Syria became part of the sterling area in practice. They became part of the sterling area in fact on 12 November 1941 (General Delegate of Free France in the Levant, Arrêté No. 381, 12 November 1941). They in effect rejoined the French franc zone on 25 January 1944. Lebanon allowed a parallel free market in all currencies except the French franc starting 16 February 1948 (perhaps retroactively justified by Lebanon, Decree No. 13532/K, 5 November 1948). It extended the free market to the French franc on 5 October 1949, in effect ending its membership in the French franc zone (Lebanon, Office des Changes, Decree No. 7, 6 October 1949). Exchange rate restrictions were abolished on 17 May 1952 after a period of progressive liberalization (Lebanon, Decree No. 8300, 17 May 1952). The government imposed limits on cash withdrawals from banks in early June 1967, around the time of the Six Day War, and removed the limits 26 June 1967.

Lebanon and Syria ended their customs union, which had existed in practice or legally since the Ottoman Empire, on 14 March 1950. An important cause of the breakup was that even though the Lebanese and Syrian pound were equal at the official exchange rates, at market rates the Lebanese pound was persistently at a premium to the Syrian pound following their irrevocable separation into two distinct monetary units on 2 February 1948.



Other

Defaults on or restructurings of debt to the foreign private sector: None. (As of 2004, though, Lebanon has a foreign debt that, for a middle-income country, is unusually high relative to the size of its economy.)

Banking crises: Bank run November 1895; two bank failures early 1964; medium-size Intra Bank failed 1966; four banks became insolvent and 11 resorted to loans from the central bank 1988-1990.

Frankel and Rose (1996) list of currency crashes: 1984, 1990.

During the Second World War, when communication between France and the Middle East was cut off, after Allied forces defeated the local administration associated with Vichy France, the Banque de Syrie et du Liban was placed under a temporary Council of Surveillance (Délégué Générale et Plénipotentiare de la France Combattante, Arrêté No. 497/FD, 2 October 1942). The Paris head office resumed control in 1945 after Allied forces had freed Paris.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Badrud-Din (1984), Himadeh (1935), Mallat (1973), Oughourlian (1982), Saba (1961).

Monetary authorities: Lebanon

Dates Type Name Legal basis Remarks
October 1856

-2 June 1863

central bank (or at least quasi central bank; private ownership) alongside government issue (as part of currency union) Ottoman Bank (headquarters London, England) alongside Ottoman government (headquarters Constantinople [now Istanbul], Turkey) United Kingdom, Royal Charter of Incorporation of the Ottoman Bank, 24 May 1856; Ottoman Empire, sanction of the sultan, June 1856 The Ottoman Bank, which was mainly owned by British stockholders, established a branch in Beirut in October 1856 and was the first bank. The second bank may have been the Deutsche Palästina Bank (headquarters Berlin, Germany), which opened a Beirut branch in 1889. The first coins were issued in the 400s BC. The Ottoman government issued notes on occasion, but they seem to have circulated only in Constantinople (now Istanbul).
3 June 1863

-9 July 1915

central bank (with commercial banking functions and mainly private ownership) (as part of currency union) Banque Ottomane Impériale (also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank) (headquarters Constantinople [now Istanbul], Turkey) Ottoman Empire, Act of Concession of the Imperial Ottoman Bank, 4 February 1863 The Banque Ottomane Impériale was granted monopoly of note issue and other privileges. It had predominantly British and French ownership, with some Turkish government ownership. It issued its first notes on 16 November 1863. The Ottoman government issued notes from 28 August 1876-12 March 1880, but they seem to have circulated little outside Constantinople (now Istanbul).
10 July 1915

-6 October 1918

government issue alongside central bank (with commercial banking functions and mainly private ownership) (as part of currency union) Ottoman government / Banque Ottomane Impériale (also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank) (headquarters for both Constantinople [now Istanbul], Turkey) Ottoman Empire, Act No. 207, 12 April 1915 The Ottoman government issued notes (evrak- nakdiye) following the Ottoman Empire's entry into the First World War.
7 October 1918

-31 October 1918

dollarization Ottoman piastre (issued by central bank Banque Ottomane Impériale [also called Imperial Ottoman Bank or Osmanl Bankas, nicknamed Ottoman Bank] [headquarters Constantinople (now Istanbul), Turkey]) apparently no specific legal authority Lebanon and Syria continued to use Ottoman currency briefly after their conquest by Allied forces during the First World War.
1 November 1918

-30 April 1920

dollarization (another type) Egyptian pound (issued by central bank National Bank of Egypt [headquarters Cairo, Egypt]) Allied Administrator-in-Chief of the Occupied Enemy Territories of the North [later West] Zone, Arrêté No. 11, 1 November 1918 The Allied military administration introduced the Egyptian pound, which was also used in Palestine, another territory the British took from the Ottoman Empire during the First World War.
1 May 1920

-31 March 1964

private monopoly issue Banque de Syrie / Banque de Syrie et du Grand Liban from 25 March 1924 / Banque de Syrie et du Liban from 1 April 1939 (headquarters for all Paris, France) France, Haut Commissaire de la République Française en Syrie et en Cilicie, Arrêté No. 129, 31 March 1920; Syria and Lebanon, Convention between the Governments of Syria and the Lebanon and the Banque de Syrie et du Grand Liban, 23 January 1924; Lebanon and Banque de Syrie et du Grand Liban, convention of 29 May 1937, ratified by Lebanon 2 June 1937 The Banque de Syrie was mostly owned by French and British stockholders but had minority government ownership. It bought all the local assets of the Ottoman Bank; in effect, many of the owners remained the same. France administered Lebanon and Syria jointly in many respects, but they grew apart over time. The bank had separately marked note issues for Lebanon from 1 April 1924, in accord with the convention of 23 January 1924. In accord with the convention of 29 May 1937, from 1 April 1939 the note-issuing department of the bank operated as a separate entity from the deposit department. The note-issuing department in turn was divided into one part for Syria and another for Lebanon. These were sometimes called l'Institut d'Émission de Syrie and l'Institut d'Émission du Liban. Lebanon fully separated its note issue from Syria on 2 February 1948. Lebanon joined the IMF on 14 April 1947.
1 April 1964

-present

central bank Masrif Lubnn or Banque du Liban (Bank of Lebanon) (headquarters Beirut, Lebanon) Lebanon, Code of Money and Credit, Decree No. 13513, 1 August 1963 Lebanon established a central bank upon the expiration of the agreement of 29 May 1937 (which had become effective on 1 April 1939). The Banque de Syrie et du Liban became a commercial bank with no note issue, called the Société Nouvelle de la Banque du Syrie et du Liban (headquarters Beirut, Lebanon), partly owned by the Ottoman Bank (headquarters Istanbul, Turkey).



Exchange rate arrangements: Lebanon

Dates Arrangement Legal basis Remarks
1516

-31 October 1918

fixed (as part of currency union); used Ottoman pound (lira) The Ottoman conquest of Lebanon occurred in 1516. The Ottoman pound became a decimal currency in 1881. When Allied forces invaded Beirut on 7 October 1918, the paper Ottoman pound was worth only 0.18 gold Ottoman (Turkish) pound coin.
1 November 1918

-30 April 1920

fixed (as part of currency union); used Egyptian pound Allied Administrator-in-Chief of the Occupied Enemy Territories of the North [later West] Zone, Arrêté No. 11, 1 November 1918 The British military administration introduced the Egyptian pound, which was also used in Palestine. The Egyptian pound was a decimal currency.
1 May 1920

-22 January 1924

hard peg (as part of currency union); Syrian £1 = 20 French francs France, Haut Commissariat de la République Française au Syrie et au Liban, Arrêté No. 129, 2 April 1920 The French administration introduced the Syrian pound (in French, livre), pegged to the French franc. The Syrian pound was a decimal currency. Arrêté No. 195, 26 April 1920, specified an exchange rate of Syrian £3 = Egyptian £1 for taxes collected after 1 May 1920.
23 January 1924

-31 December 1926

hard peg (as part of currency union); Lebanese-Syrian £1 = 20 French francs Convention between the Governments of Syria and the Lebanon and the Banque de Syrie et du Grand Liban, 23 January 1924 The Syrian pound became the Lebanese-Syrian pound to recognize Lebanon explicitly; the note issues of the two countries were separated from 1 April 1924, though.
1 January 1927

-31 August 1928

hard peg (as part of currency union), Lebanese-Syrian gold £1 = 20 pre-1914 gold French francs (or approximately Lebanese-Syrian gold £3.86= US$1); also hard peg, Lebanese-Syrian paper £1 = 20 paper French francs Haut Commissaire de la République Française en Syrie et au Liban, Arrêté No. 653, 28 September 1926; Arrêté No. 654, 29 September 1926; also Arrêté No. 956, 11 April 1927 After the First World War, the French franc was until December 1926 an often rapidly depreciating currency. France, Haut Commissaire de la République Française en Syrie et en Cilicie, Arrêté No. 1137, 5 December 1921 allowed people to use any currency for all contracts of at least 45 days. Haut Commissaire de la République Française en Syrie et au Liban, Arrêté No. 2396, 23 January 1924, allowed all contracts of at least five days to use any currency as the unit of account, but required that payment be in Syrian pounds as the medium of exchange. Arrêté No. 2396 also allowed dealings in gold and silver, which were widely used in the countryside. After the arrêté was decreed, Turkish gold coins circulated extensively in the cities, not just in the countryside as before. As inflation continued, the French administration of Syria and Lebanon devised the Lebanese-Syrian gold pound as a more stable unit of account, and declared it with the arrêtés of September 1926.
1 September 1928

-31 March 1939

hard peg (as part of currency union); Lebanese-Syrian £1 = 20 French francs Haut Commissaire de la République Française en Syrie et au Liban, Arrêté No. 2094, 29 August 1928 After the French franc was stabilized against gold in practice December 1926 and by law 25 June 1928, the Lebanese-Syrian paper pound also stabilized against gold, so the gold Lebanese-Syrian pound was discontinued. Conversion occurred at Lebanese-Syrian gold £1 = Lebanese-Syrian paper £4.92.
1 April 1939

-7 June 1941

hard peg (as part of currency union); Lebanese £1 = 20 French francs Lebanon and Banque de Syrie et du Grand Liban, convention of 29 May 1937, ratified by Lebanon 2 June 1937 Technically, the Lebanese and Syrian currencies separated at this point, but the separation did not become complete until 2 February 1948.
8 June 1941

-11 November 1941

hard peg (as part of currency union); Lebanese £1 = 20 French francs (nominally) no legislation Communications with France were cut off as Allied forces began their invasion of Lebanon and Syria during the Second World War. The invasion ended with the defeat of the local administration associated with Vichy France. The exchange rate with the French franc became notional.
12 November 1941

-24 January 1944

hard peg (as part of currency union); Syrian £1 = 20 French francs (nominally), or Syrian £8.83 = UK£1 United Kingdom and Free French government (Comité National de la France Libre), financial agreement of 19 March 1941; General Delegate of Free France in the Levant, Arrêté No. 381, 12 November 1941; proclamation of 26 November 1941 The Free French government in London had provisionally (and notionally) attached Lebanon and Syria to the sterling area even before the local Vichy administration was expelled. The exchange rate with the pound sterling was derived from the prewar cross rate of 176.625 French francs = UK£1.
25 January 1944

-25 December 1945

hard peg (as part of currency union); Lebanese £8.83 = UK£1, or Lebanese £1 = 22.65 French francs United Kingdom, Free French government (Comité National de la France Libre), Lebanon, and Syria, Catroux Accord, 25 January 1944; United Kingdom and Free French government, financial agreement of 8 February 1944; France, Lebanon, and Syria, agreement of 9 February 1944 signed in Damascus In French African possessions administered by the Free French government, local francs had been devalued from 176.60 local francs = UK£1 to 200 local francs = UK£1 on 3 February 1943. The French franc would be devalued on 6 December 1944, after the Allies invaded France and achieved control of most of the country, including Paris. The Catroux Accord revalued the Lebanese and Syrian pounds against the French franc to avoid a devaluation against the pound sterling.
26 December 1945

-15 March 1946

hard peg (as part of currency union); Lebanese £8.83125 = UK£1, or Lebanese £1 = 54.35 French francs consequence of France, Ministry of Finance and Economic Affairs, Avis de l'Office des Changes et de la Caisse Centrale de la France d'Outre-Mer, 26 December 1945 Lebanon and Syria did not follow the devaluation of French franc on 26 December 1945. By an agreement between the French Minister of Finance and the Banque de Syrie et du Liban of 21 August 1947, France agreed to compensate the bank for losses inflicted by the devaluation on the pound sterling value of certain French franc assets held officially or quasi officially for the Lebanese and Syrian governments (France, Law No. 47/1563, 21 August 1947).

RR: De facto band of +/-5% around US dollar from October 1946; dual market.

16 March 1946

-21 April 1947

hard peg (as part of currency union); Lebanese £1 = 54.35 French francs Letter from France, Délégation Générale to Lebanese Minister of Foreign Affairs, 15 March 1946 The French government informed the Lebanese government that it would no longer be able to supply pounds sterling on demand. Lebanon and Syria were therefore detached from the sterling area and reattached to the French franc zone.

RR: From October 1946, de facto band of +/-5% around US dollar; dual market.

22 April 1947

-25 January 1948

hard peg (as part of currency union); official rate Lebanese £2.19148 = US$1, or Lebanese £1 =54.35 French francs = 0.4055512g gold Lebanon, law of 22 April 1947; Monetary Law, 24 May 1949 Lebanon established a gold parity at the start of this period, agreed to it with the IMF on 16 July 1947, and and registered it with the IMF on 29 July 1947. The rate was such as to make the cross rate with the pound sterling Lebanese £8.83125 = UK£1. The 1949 decree established in Lebanese law the gold parity communicated to the IMF in 1947. The French franc remained the de facto anchor currency. The 1949 law more formally established the gold parity communicated to the IMF in 1947.

RR: De facto band of +/-5% around US dollar; dual market.

26 January 1948

-1 February 1948

hard peg (as part of currency union); official rate Lebanese £2.19148 = US$1, or Lebanese £1 = 97.83 French francs = 0.4055512g gold consequence of France, Ministry of Finance and Economic Affairs, Avis No. 291 de l'Office des Changes, 26 January 1948 Lebanon did not follow the devaluation of the French franc on 26 January 1948. By a Lebanese-French monetary agreement signed on 6 February 1948 but made retroactive to 24 January 1948, France agreed to offset the effect of devaluations of the French franc on certain French franc assets of the Lebanese government (France, Decree No. 49-342, 14 March 1949; Lebanon, law of 24 September 1948).

RR: De facto band of +/-5% around US dollar; dual market.

2 February 1948

-16 October 1948

hard peg, multiple rates (see Remarks); official rate Lebanese £2.19148 = US$1, or Lebanese £1 = 97.83 French francs = 0.4055512g gold Lebanon, Ministry of Finance, communiqué of 2 February 1948 Lebanon separated its note issue from that of Syria by making Lebanese-marked note issues of the Banque de Syrie et du Liban sole legal tender, so by this point the Lebanese and Syrian pounds were distinct currencies. Multiple exchange rates began by 26 September 1949, and perhaps as early as 29 July 1947.

RR: De facto band of +/-5% around US dollar and dual market to June 1950. From July 1950, de facto band of +/-2% around US dollar and dual market. Official rate applied only to some government transactions.

17 October 1948

-19 September 1949

hard peg, multiple rates; official rate Lebanese £2.19148 = US$1, or Lebanese £1 = 120.30 French francs = 0.4055512g gold consequence of France, Ministry of Finance and Economic Affairs, Avis No. 352 de l'Office des Changes, 17 October 1948 Lebanon did not follow the devaluation of the French franc on 17 October 1948. On 27 April 1949, the French franc was devalued from 1,062 French francs = UK£1 and 263.50 French francs = US$1 to 1,097 French francs = UK£1 and 272 French francs = US$1. Apparently the rate of the French franc with the Lebanese and Syrian pounds remained unchanged, because France had multiple exchange rates at the time.
20 September 1949

-4 October 1949

hard peg, multiple rates; official rate Lebanese £2.19148 = US$1, or Lebanese £1 = 159.70 French francs = 0.4055512g gold consequence of France, Ministry of Finance and Economic Affairs, Avis No. 421 de l'Office des Changes, 20 September 1949 Lebanon again did not follow the devaluation of the French franc on 20 September 1949. The French franc had followed the devaluation of the pound sterling on 18 September 1949.
5 October 1949

-16 May 1952

hard peg, multiple rates; official rate Lebanese £2.19148 = US$1, or Lebanese £1 = 0.4055512g gold Lebanon, Office des Changes, Decree No. 7, 6 October 1949 In response to the devaluation of the French franc on 20 September 1949, on 5 October 1949 Lebanon allowed a free market in the French franc. I therefore deem that Lebanon ended its membership in the French franc zone on that date.
17 May 1952

-31 December 1964

hard peg, dual rate; official rate Lebanese £2.19148 = US$1, or Lebanese £1 = 0.4055512g gold Reduced the number of exchange rates to the official rate and a fluctuating free market rate. The official rate was inoperative by 1962, in the sense that the exchange rate sometimes exceeded the maximum spread of +/-1% around the US dollar established by the IMF's Articles of Agreement. By 1962 the market rate was persistently more depreciated than the official rate, though the trend later reversed so that from 1972 to the end of this period the market rate was more appreciated than the official rate.

RR: De facto band of +/-2% around US dollar.

1 January 1965

-31 March 1978

officially hard peg, dual rate, official rate Lebanese £3.08 = US$1; in practice, managed float (see Remarks) Lebanon, Article 229, Code of Money and Credit, Decree No. 13513, 1 August 1963; Minister of Finance, Arrêté No. 4800/1, 30 December 1964 Registered a "provisional" or "transitory" legal parity with the IMF; it was approximately the market rate at the time. All transactions continued to occur at the market rate, which fluctuated. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Lebanon's gold parity was by then long inoperative. The Lebanese government closed the foreign-exchange market on 16 August 1971 and allowed it to reopen on 18 August 1971.

RR: De facto band of +/-2% around US dollar to August 1975. De facto band of +/-5% around US dollar from September 1975.

1 April 1978

-28 September 1998

managed float (IMF: independent float from 1982, when the IMF first distinguished between managed and independent floats) International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members. There was a second rate used for customs valuation of imports from 1 February 1985, but it was more of an import duty than a second exchange rate.

RR: De facto band of +/-5% around US dollar to February 1984. Freely falling / freely floating March 1984-July 1991. De facto crawling peg to US dollar August 1991-February 1993. De facto peg to US dollar from March 1993.

29 September 1998

-present

hard peg; Lebanese £1,508 = US$1 Moved from a unacknowledged soft peg to the US dollar to an officially acknowledged hard peg. The official acknowledgment may not have been until October 1998, but the exchange rate stabilized about September 29.

RR: De facto peg to US dollar to December 2001, when data end.



Malaysia



Political sketch

Parts of the country were formerly the Straits Settlements, Malaya, Sarawak, Sabah, and North Borneo. Malaya (the mainland) became independent from the United Kingdom on 31 August 1957; Sarawak and Sabah became independent from the United Kingdom on 16 September 1963.

Sumatran exiles founded the city of Malacca around 1400. It was captured by the Portuguese in 1511 and by the Dutch in 1641. Minangkabau peoples from Sumatra migrated to Malaya (the mainland part of present-day Malaysia) in the late 1600s, and in the 1700s the Buginese from the island of Celebes (now part of Indonesia) invaded Malaya and established the sultanates of Selangor and Johore. The British founded a settlement on Singapore Island in 1819 and by 1867 had established the Straits Settlements: Malacca, Singapore, and Penang (now Pinang) Island. During the late 1800s, Chinese began to migrate to Malaya. In 1896, the Malay states accepted British advisors, and Perak, Selangor, Negri Sembilan, and Pahang formed a federation. The other states of present-day peninsular Malaysia were known as the unfederated states. From the 1890s the British invested heavily in Malaya, developing transportation and rubber plantations. In December 1941, at the beginning of the Second World War in the Pacific, the Japanese invaded Malaya and Borneo; they captured Singapore in early 1942. During the war Japan transferred ownership of the four northern states of Malaya to its ally Thailand. After the war British rule was restored and the four states rejoined Malaya.

British attempts to make the federated states into a united state (the Malayan Union) aroused regionalist passions. In 1946 the United Malaya National Organization (UMNO) was established, and in 1948 Malaya was federated with Penang Island. In the same year the Malayan Communist Party was formed. Former anti-Japanese guerillas reformed under Malayan Chinese communist leadership in a long but ultimately unsuccessful war against the British. In 1955 the Malayan Chinese Association joined UMNO in an anticommunist, anticolonial coalition that won 51 of 52 parliamentary seats. The Federation of Malaya (peninsular Malaysia) became independent from the United Kingdom on 31 August 1957. In the 1960s membership in the federation shifted several times, finally settling into the present pattern in 1963, when Malaysia was established, including both the peninsula and parts of the island of Borneo. Singapore became a part of the federation for a short time, but attempts to achieve deeper union failed because of political differences springing partly from ethnicity. (Singapore's population is mainly of Chinese descent.) Malaysia's central government eventually achieved substantial dominance over the state governments and their hereditary rulers. Turbulence in the government went on into the early 1970s, when stability returned and the Malaysian economy began to grow rapidly. Malaysia has achieved considerable prosperity as an exporter of raw materials and manufactured goods. The political system is semidemocratic, with an emphasis on promoting the economic prospects of the Malayan majority, who lag behind the large Chinese and Indian minorities in prosperity. The United Malays National Organization (UMNO) has held power by itself or in coalitions since independence.



Wars since 1500

Portuguese Conquests in India and the East Indies, 1500-1545; Javanese Siege of Malacca, 1586; Portuguese-Dutch Wars in the East Indies, 1601-1641 (Portugal and local allies against Netherlands and local allies); Naning War, 1831-1832 (Malay kingdom against United Kingdom); Bau Native Rebellion of 1836 (against the sultan of Brunei); Sarawak Chinese Uprising of 1857 (against the rajah of Sarawak); Selangor Civil War, 1867-1873; Perak War, 1875-1876 (Malay kingdom against United Kingdom); Second World War in the Pacific, 1941-1945 (Japan against United States, United Kingdom, Netherlands, China, and allies); Malay Jungle Wars of 1948-1960 (communist guerilla war against Malay government); Indonesian-Malaysian War of 1963-1966.



Convertibility

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Malaya and Singapore apparently introduced foreign exchange controls on 18 September 1939, shortly after the Second World War began in Europe. On 6 August 1964, Malaya applied exchange controls to transactions with Singapore, Sarawak, and Sabah (under Malaya, Exchange Control Ordinance of 1953). Exchange controls were liberal, and they ended for Sarawak and Sabah when Bank Negara Malaysia (the Central Bank of Malaysia) became the monetary authority for those territories on 18 January 1965. Malaysia revoked various exchange control measures on 8 May 1973, making the Malaysian dollar fully convertible. Malaysia left the sterling area on 23 June 1972.

During the East Asian currency crisis, Malaysia imposed controls on derivatives 4 August 1997. By a government announcement of 1 September 1998, it imposed much stronger capital controls 1 September 1998-14 February 1999.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Minor banking crisis 1985-1988; two large banks merged with other banks and two finance companies, including largest finance company, taken over by central bank as part of a broader restructuring of financial system 1997-past 1999.

Frankel and Rose (1996) list of currency crashes: None, but affected by East Asian currency crisis, 1997-1998.

Singapore ceased to be part of Malaysia 9 August 1965 but it remained in a currency union with Malaysia until establishing its own currency 12 April 1967.

Brunei, Malaysia, and Singapore had a common currency for many years, issued by a currency board. Its notes ceased to be legal tender in all three countries on 16 January 1969 (Brunei, Malaysia, and Singapore, agreement of 4 June 1969). The Interchangeability Agreement of 1967 between Brunei, Malaysia, and Signore provided that effective 12 June 1967, banks and monetary authorities in each country would accept the notes and coins of the other two countries without charging exchange fees. Malaysia ended the agreement between itself and Singapore on 8 May 1973. Brunei and Singapore continue to have an agreement in force today (2004).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Bank Negara Malaysia (1969), Bányai (1974), Donnison (1956), Fujita (2003), King (1957), H. Y. Lee (1987), S. Y. Lee (1974, 1990a), Shaw and Haji Ali (1971).

Monetary authorities: Penang (Pinang), Malacca, Labuan

Dates Type Name Legal basis Remarks
1860

-31 March 1946

see Remarks see Remarks see Remarks Penang and Malacca, along with Singapore, were joined into the Straits Settlements in 1826. Labuan was incorporated into Singapore on 1 January 1907, but it became a separate part of the Straits Settlements on 1 December 1912. On 1 April 1946, Penang and Malacca became part of Malaya, Labuan became part of North Borneo, and Singapore became a separate colony. For the monetary history of the Straits Settlements, see the table for Singapore. The first bank was the Chartered Mercantile Bank of India, London and China (headquarters London, England), in Penang, in 1859 or (according to other, more likely sources) 1860. The first coins were issued in 1450 in Malacca.



Monetary authorities: Malaya

Dates Type Name Legal basis Remarks
1849

-1888

dollarization Spanish and similar silver dollars (Straits dollar from 1867) (notes were issued by free banks in Singapore) The first note-issuing bank began in Singapore in 1849. There were no banks in Malaya at the time, but people used notes of banks with branches in Singapore. Before this, Malayans used Mexican, Spanish, and (to a lesser extent) currency. The British ruled Malaya from India until 1867. The first coins were issued in 1450 in Malacca (which at the time was of course not part of a separate political unit).
1888

-28 September 1909

free banking multiple banks (eight banks in the Straits Settlements issued notes, which circulated in Malaya) various bank charters and articles of association The first bank in Malaya proper was the Chartered Bank of India, Australia and China (headquarters London, England), which opened branches in Kuala Lumpur and Taiping in 1888. Malayan bank branches circulated notes of their Straits Settlement offices.
29 September 1909

-31 December 1937?

dollarization Straits dollar (issued by currency board, later currency board-like Board of Commissioners of Currency, Straits Settlements [headquarters Singapore]) The currency board in the Straits Settlement became the monopoly issuer of notes there, and hence in Malaya.
1 January 1938?

-22 February 1942

joint currency board Board of Commissioners of Currency, Malaya (headquarters Singapore) in 1939 the various Malay states enacted legislation corresponding to Straits Settlements [Singapore, etc.], Currency Ordinance, No. 23 of 1938 Malaya joined Singapore in a currency board.
23 February 1942

-31 March 1943

occupation currency alongside currency board (frozen issues; see Remarks) Japanese (military) government (headquarters Tokyo, Japan) alongside Board of Commissioners of Currency, Malaya (headquarters Singapore) Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 The Japanese issued occupation currency starting on 19 December 1941, in their conquest of present-day Malaysia and Singapore during Second World War. The decree law of 1942 allowed the continued use of the Malayan dollar. However, Malayan dollars soon went out of circulation because they were hoarded as a more reliable store of value than Japanese military currency.
1 April 1943

-4 September 1945

occupation currency (issued by joint central bank) Nampo Kaihatsu Kinko (Southern Development Bank) (headquarters Tokyo, Japan) Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank was the Japanese occupation central bank for present-day Brunei, Burma, Indonesia, Malaysia, Philippines, and Singapore. Notes of the Malayan currency board no longer circulated, though they continued to be hoarded as stores of value.
5 September 1945

-25 January 1959

joint currency board Board of Commissioners of Currency, Malaya / Board of Commissioners of Currency, Malaya and British Borneo from 1 January 1952 (headquarters Singapore / Kuala Lumpur, Malaya [later Malaysia] from July 1962) British Military Administration, Malaya, Military Administration Proclamation, No. 1, 15 August 1945; Malayan Union, Currency (Transitional Amendment) Ordinance, No. 5 of 1946; Malaya British Borneo Currency Agreement, 1950 Japan surrendered to end the Second World War. The Military Administration Proclamation restored laws in effect before Japanese occupation. The British military administration resumed exchange into pounds sterling. The currency board officially resumed operations on 1 April 1946. Malaya joined the IMF on 7 March 1958.
26 January 1959

-15 September 1963

joint currency board alongside central bank (largely dormant at the time) Board of Commissioners of Currency, Malaya and British Borneo (headquarters Singapore / Kuala Lumpur, Malaya [later Malaysia] from July 1962), alongside Bank Negara Tanah Melayu (Central Bank of Malaya) (headquarters Kuala Lumpur, Malaya [later Malaysia]) Malaya British Borneo Currency Agreement, 1950; Malaya British Borneo Currency Agreement, 1960; Malaya, Central Bank of Malaya Ordinance, 1958 Established a central bank in accord with prevailing economic theory of the time, but the central bank remained largely dormant to preserve the currency union between Malaya and Singapore. The central bank opened on 24 January 1959, and the central bank ordinance became effective on 26 January 1959.



Monetary authorities: Sarawak

Dates Type Name Legal basis Remarks
September 1880

-September 1927

government issue government of Sarawak (headquarters Kuching, Sarawak) May have operated as a currency board. The first bank was apparently the Oversea- Chinese Bank (headquarters Singapore), in Kuching, sometime between 1919, when the bank was founded, and 1924. The second bank was apparently the Chartered Bank of India, Australia and China (headquarters London, England), which opened a branch in Kuching in late 1924. The first coins were issued in 1841.
September 1927

-22 February 1942

currency board Sarawak Currency Fund (headquarters Kuching, Sarawak) The monetary authority definitely operated as a currency board by this time. Sarawak, Notice No. 237, 1 April 1930, made Sarawak notes and Straits settlement coins sole unlimited legal tender.
23 February 1942

-31 March 1943

occupation currency alongside currency board (issues frozen; see Remarks) Japanese (military) government (headquarters Tokyo, Japan) alongside Sarawak Currency Fund (headquarters Kuching, Sarawak) Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 The Japanese issued an occupation currency following their conquest of present-day Malaysia and Singapore during the Second World War. Currency board notes continued to be legal tender. The decree law of 1942 allowed the continued use of the Malayan dollar. However, Malayan dollars soon went out of circulation because they were hoarded as a more reliable store of value than Japanese military currency.
1 April 1943

-10 September 1945

occupation currency (issued by joint central bank) Nampo Kaihatsu Kinko (Southern Development Bank) (headquarters Tokyo, Japan) Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank was the Japanese occupation central bank for present-day Brunei, Burma, Indonesia, Malaysia, Philippines, and Singapore. Notes of the Malayan currency board no longer circulated, though they continued to be hoarded as stores of value.
11 September 1945

-31 December 1951

currency board (issues frozen) alongside dollarization Sarawak Currency Fund (headquarters Kuching, Sarawak) alongside Malay dollar (issued by currency board Malay Currency board [headquarters Singapore]) Allied military administration (under lieutenant-general of First Australian Corps), British Borneo, Martial Law Proclamation, No. 1, 10 June 1945; Sarawak, Proclamations (Continuance) Order, 1946 Japan surrendered to end the Second World War. The Martial Law Proclamation restored laws in force before Japanese occupation. The British military administration resumed exchange into pounds sterling. The Malay Currency Board officially resumed operations on 1 April 1946. Civilian administration in Sarawak resumed on 15 April 1946. During this whole period the Sarawak Currency Fund made no new issues of notes.
1 January 1952

-17 January 1965

joint currency board Board of Commissioners of Currency, Malaya and British Borneo (headquarters Singapore / Kuala Lumpur, Malaya [later Malaysia] from July 1962) Malaya British Borneo Currency Agreement, 1950; Sarawak, Currency Proclamation, 25 November 1952; Malaya British Borneo Currency Agreement, 1960 Sarawak joined the Singapore-Malay currency board. By the 1952 proclamation, the Malayan dollar became sole legal tender effective 1 January 1953.
18 January 1965

-11 June 1967

joint currency board alongside central bank (which was largely dormant) Board of Commissioners of Currency, Malaya and British Borneo (headquarters Kuala Lumpur, Malaysia) alongside Bank Negara Malaysia (Central Bank of Malaysia) (headquarters Kuala Lumpur, Malaysia) Malaya, Central Bank of Malaya Ordinance, 1958; Central Bank of Malaysia (Amendment and Extension) Act, 1965 The Malaysian central bank extended its jurisdiction to Sabah and Sarawak. According to the central bank's 1964 annual report, this became effective 18 January 1965; according to the 1965 annual report, 21 January 1965. Initially, the central bank remained dormant to preserve the currency union between Malaya and Singapore.
12 June 1967

-present

central bank Bank Negara Malaysia (Central Bank of Malaysia) (headquarters Kuala Lumpur, Malaysia) Malaya, Central Bank of Malaya Ordinance, 1958 The central bank became active after hopes of political union with Singapore broke down, leading to the breakup of currency union between Malaysia on the one hand and Brunei and Singapore on the other hand. Notes and coins of the Board of Commissioners of Currency, Malaya and British Borneo ceased to be legal tender in Brunei, Malaysia, and Singapore effective 16 January 1969.



Monetary authorities: Sabah (North Borneo)

Dates Type Name Legal basis Remarks
1880s

-March 1921

private monopoly issue British North Borneo Company (headquarters London, England) United Kingdom, charter of British North Borneo Company, August 1881 The British North Borneo Company governed Sabah until the Japanese invasion of 1942. The first coins were issued in 1882.
March 1921

-22 February 1942

government issue State Bank (headquarters Sandakan, North Borneo [now Sabah]) The government took over the note issue in line with the prevailing view of the time that note issue should be a government monopoly. The notes still said "British North Borneo Company."
23 February 1942

-31 March 1943

occupation currency alongside government issue (frozen) Japanese (military) government alongside State Bank (headquarters for both Sandakan, North Borneo [now Sabah]) Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 The Japanese issued occupation currency following their conquest of present-day Malaysia and Singapore during the Second World War. The decree law of 1942 allowed the continued use of the Malayan dollar. However, Malayan dollars soon went out of circulation because they were hoarded as a more reliable store of value than Japanese military currency.
1 April 1943

-10 September 1945

occupation currency (issued by joint central bank) Nampo Kaihatsu Kinko (Southern Development Bank) (headquarters Tokyo, Japan) Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank was the Japanese occupation central bank for present-day Brunei, Burma, Indonesia, Malaysia, Philippines, and Singapore.
11 September 1945

-31 December 1951

government issue (see Remarks) State Bank (headquarters Sandakan, North Borneo [now Sabah] / Jesselton, North Borneo [now Kota Kinabalu, Sabah] from 1946) Allied military administration (under lieutenant-general of First Australian Corps), British Borneo, Martial Law Proclamation, No. 1, 10 June 1945 Japan surrendered to end the Second World War. The Martial Law Proclamation restored laws in force before Japanese occupation. The British military administration resumed exchange into pounds sterling. The notes still said British North Borneo Company, although the company ceded North Borneo to the British government as a colony on 15 July 1946. The State Bank functioned as a commercial bank that also issued notes. It was not intended to be a central bank, hence I have classified this period as one of government issue.
1 January 1952

-17 January 1965

joint currency board Board of Commissioners of Currency, Malaya and British Borneo (headquarters Singapore / Kuala Lumpur, Malaya [later Malaysia] from July 1962) Malaya British Borneo Currency Agreement, 1950; Malaya British Borneo Currency Agreement, 1960 Joined in a regional currency arrangement.
18 January 1965

-11 June 1967

joint currency board alongside central bank (which was largely dormant) Board of Commissioners of Currency, Malaya and British Borneo (headquarters Kuala Lumpur, Malaysia) alongside Bank Negara Malaysia (Central Bank of Malaysia) (headquarters Kuala Lumpur, Malaysia) Malaya, Central Bank of Malaya Ordinance, 1958; Central Bank of Malaysia (Amendment and Extension) Act, 1965 The Malaysian central bank extended its jurisdiction to Sabah and Sarawak. According to the central bank's 1964 annual report, this became effective 18 January 1965; according to the 1965 annual report, 21 January 1965. Initially, the central bank remained dormant to preserve the currency union between Malaya and Singapore.
12 June 1967

-present

central bank Bank Negara Malaysia (Central Bank of Malaysia) (headquarters Kuala Lumpur, Malaysia) Malaya, Central Bank of Malaya Ordinance, 1958 The central bank became active after hopes of political union with Singapore broke down, leading to the breakup of currency union between Malaysia on the one hand and Brunei and Singapore on the other hand. Notes and coins of the Board of Commissioners of Currency, Malaya and British Borneo ceased to be legal tender in Brunei, Malaysia, and Singapore effective 16 January 1969.



Monetary authorities: Malaysia

Dates Type Name Legal basis Remarks
16 September 1963

-11 June 1967

joint currency board alongside central bank (which was largely dormant) Board of Commissioners of Currency, Malaya and British Borneo (headquarters Kuala Lumpur, Malaysia) alongside Bank Negara Malaysia (Central Bank of Malaysia) (headquarters Kuala Lumpur, Malaysia) Malaya, Central Bank of Malaya Ordinance, 1958; Malaya British Borneo Currency Agreement, 1960 (Malaya, Currency Act, No. 278 of 1960) Malaysia came into existence at start of this period as Malaya, Sarawak, and Sabah federated. The central bank remained dormant to preserve the currency union between Malaya and Singapore. The central banks's jurisdiction was extended to Sabah, Sarawak, and Singapore on 21 June 1965.
12 June 1967

-present

central bank Bank Negara Malaysia (Central Bank of Malaysia) (headquarters Kuala Lumpur, Malaysia) Malaya, Central Bank of Malaya Ordinance, 1958 The central bank became active after hopes of political union with Singapore broke down, leading to the breakup of currency union between Malaysia on the one hand and Brunei and Singapore on the other hand. Notes and coins of the Board of Commissioners of Currency, Malaya and British Borneo ceased to be legal tender in Brunei, Malaysia, and Singapore effective 16 January 1969.



Exchange rate arrangements: Penang (Pinang), Malacca, Labuan

Dates Arrangement Legal basis Remarks
1786

-1946

see Remarks see Remarks Penang and Malacca, along with Singapore, were joined into the Straits Settlements in 1826. Labuan was incorporated into Singapore on 1 January 1907, but it became a separate part of the Straits Settlements on 1 December 1912. On 1 April 1946, Penang and Malacca became part of Malaya, Labuan became part of North Borneo, and Singapore became a separate colony. For the monetary history of the Straits Settlements, see the table for Singapore.



Exchange rate arrangements: Malaya

Dates Arrangement Legal basis Remarks
1500s

-31 March 1867

fixed; used Mexican and Spanish silver piasters (pesos, dollars) and Indian silver rupee These were all silver coins; the silver standard predominated in Asia at the time.
1 April 1867

-31 December 1937?

fixed; used Straits dollar The Straits (Singapore) dollar was established; it switched from a silver standard to a gold exchange (pound sterling) standard on 1 March 1906. The Straits dollar was a decimal currency.
1 January 1938?

-22 February 1942

fixed (as part of currency union); Malayan $60 = UK£7, or Malayan $1 = UK 2 shillings 4 pence corresponding Singapore law was Straits Settlements, Currency Ordinance, No. 23 of 1938 The Malayan dollar replaced Straits dollar when the currency union between the Straits Settlements and Malay came into existence; Malayan $1 = Straits $1.
23 February 1942

-31 March 1943

hard peg (as part of currency union); Malayan $1 = Japanese military $1 (= 1 Japanese yen) Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 The Japanese introduced an occupation currency following their conquest of present-day Malaysia and Singapore during the Second World War. Nominal convertibility into Japanese yen existed, but in practice convertibility was limited. The decree law of 1942 allowed the continued use of the Malayan dollar. However, Malayan dollars soon went out of circulation because they were hoarded as a more reliable store of value than occupation currency. The prewar exchange rate had been about 2 Japanese yen = Malayan $1.
1 April 1943

-4 September 1945

hard peg (as part of currency union); Southern Development Bank $1 = 1 Japanese yen Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank, the Japanese occupation central bank for southeast Asia, began issuing notes. Convertibility into the Japanese yen was limited. On the black market, the Southern Development Bank dollar depreciated rapidly against the still-hoarded Malayan dollar, to which it remained officially equal.
5 September 1945

-19 July 1962

fixed (as part of currency union); Malayan $60 = UK£7, or Malayan $1 = UK 2 shillings 4 pence British Military Administration, Malaya, Military Administration Proclamation, No. 1, 15 August 1945 Japan surrendered to end the Second World War. The Military Administration Proclamation restored laws in effect before Japanese occupation. The British military administration resumed exchange into pounds sterling. The currency board officially resumed operations on 1 April 1946. The British declared Japanese occupation currency to be worthless.
20 July 1962

-15 September 1963

fixed (as part of currency union); Malayan $60 = UK£7, or Malayan $1 = UK 2 shillings 4 pence = 0.200229g gold apparently decision of Malay government and Bank Negara Tanah Malayu (Central Bank of Malaya), 1962 Malaya registered a gold parity with the IMF.



Exchange rate arrangements: Sarawak

Dates Arrangement Legal basis Remarks
September 1880

-September 1927

hard peg; Sarawak $1 = Straits $1 The government began issuing the Sarawak dollar, a decimal currency. A proclamation of the Rajah Muda (ruler) on 20 November 1904 in effect made the Straits dollar the unit of account and made Straits dollar coins the standard coins. Order No. 1 of 1 January 1906 stated that only Straits dollars would be accepted at government treasures henceforth.
September 1927

-31 December 1937?

fixed; Sarawak $1 = Straits $1 Converted the government issue into a currency board.
1 January? 1938

-22 February 1942

fixed (as part of currency union); Sarawak $1 = Malayan $1 The Malayan dollar replaced Straits dollar when the currency union between the Straits Settlements and Malay came into existence; Malayan $1 = Straits $1.
23 February 1942

-31 March 1943

hard peg (as part of currency union); Sarawak $1 = Japanese military $1 (= 1 Japanese yen) Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 The Japanese introduced an occupation currency following their conquest of present-day Malaysia and Singapore during the Second World War. Nominal convertibility into Japanese yen existed, but in practice convertibility was limited. The decree law of 1942 allowed the continued use of the Malayan dollar. However, Malayan (and Sarawak) dollars soon went out of circulation because they were hoarded as a more reliable store of value than Japanese military currency. The prewar exchange rate had been about 2 Japanese yen = Sarawak $1.
1 April 1943

-4 September 1945

hard peg (as part of currency union); Southern Development Bank $1 = 1 Japanese yen Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank, the Japanese occupation central bank for southeast Asia, began issuing notes. Nominal convertibility into Japanese yen existed, but in practice convertibility was limited. On the black market, the Southern Development Bank dollar depreciated rapidly against the still-hoarded Sarawak dollar, to which it remained officially equal.
5 September 1945

-31 December 1951

fixed; Sarawak $60 = UK£7, or Sarawak $1 = UK 2 shillings 4 pence (= Malayan $1) Allied military administration (under lieutenant-general of First Australian Corps), British Borneo, Martial Law Proclamation, No. 1, 10 June 1945 Japan surrendered to end the Second World War. The Martial Law Proclamation restored laws in force before Japanese occupation. The British military administration resumed exchange into pounds sterling. The Sarawak dollar was re-established. However, the Sarawak Currency Fund issued no new notes, and notes of the Malayan currency board were used alongside locally issued currency. The Malayan currency board officially resumed operations on 1 April 1946. Japanese occupation currency was declared to be worthless.
1 January 1952

-17 January 1965

fixed (as part of currency union); Malayan $60 = UK£7, or Malayan $1 = UK 2 shillings 4 pence Malaya British Borneo Currency Agreement, 1950; Sarawak, Currency Proclamation, 25 November 1952 The Malayan dollar replaced the Sarawak dollar when Sarawak joined the Malayan currency union.
18 January 1965

-present

fixed (as part of currency union); uses Malaysian dollar (ringgit since 28 August 1975) Malaya, Central Bank of Malaya Ordinance, 1958; Central Bank of Malaysia (Amendment and Extension) Act, 1965 The Malaysian central bank extended its jurisdiction to Sabah and Sarawak.



Exchange rate arrangements: Sabah (North Borneo)

Dates Arrangement Legal basis Remarks
21 March 1886

-31 December 1937?

hard peg; North Borneo $1 = Straits $1 The British North Borneo Company began issuing notes. I have dated the period as beginning on 21 March 1886 because that is the date on the first notes. The North Borneo dollar was a decimal currency.
1 January 1938?

-22 February 1942

hard peg; North Borneo $1 = Malayan $1 The Malayan dollar replaced Straits dollar when the currency union between the Straits Settlements and Malay came into existence; Malayan $1 = Straits $1. The anchor of the North Borneo dollar accordingly changed.
23 February 1942

-31 March 1943

hard peg (as part of currency union); North Borneo $1 = Japanese military $1 (= 1 Japanese yen) Japanese military administration of Malaya and Singapore, decree law of 25 January 1942, published 23 February 1942 The Japanese introduced an occupation currency following their conquest of present-day Malaysia and Singapore during the Second World War. Nominal convertibility into Japanese yen existed, but in practice convertibility was limited. The decree law of 1942 allowed the continued use of the Malayan dollar. However, Malayan (and North Borneo) dollars soon went out of circulation because they were hoarded as a more reliable store of value than Japanese military currency. The prewar exchange rate had been about 2 Japanese yen = North Borneo $1.
1 April 1943

-4 September 1945

hard peg (as part of currency union); Southern Development Bank $1 = 1 Japanese yen Japan, law of 20 February 1942 establishing Southern Development Bank; decree? of 26 March 1943 allowing it to issue notes The Southern Development Bank, the Japanese occupation central bank for southeast Asia, began issuing notes. Nominal convertibility into Japanese yen existed, but in practice convertibility was limited. On the black market, the Southern Development Bank dollar depreciated rapidly against the still-hoarded North Borneo dollar, to which it remained officially equal.
5 September 1945

-31 December 1951

hard peg; North Borneo $60 = UK£7, or North Borneo $1 = UK 2 shillings 4 pence ( = Malayan $1) Allied military administration (under lieutenant-general of First Australian Corps), British Borneo, Martial Law Proclamation, No. 1, 10 June 1945 Japan surrendered to end the Second World War. The Martial Law Proclamation restored laws in force before Japanese occupation. The North Borneo dollar was re-established. The British military administration resumed exchange into pounds sterling. Japanese occupation currency was declared to be worthless.
1 January 1952

-17 January 1965

fixed (as part of currency union); Malayan $60 = UK£7, or Malayan $1 = UK 2 shillings 4 pence Malaya British Borneo Currency Agreement, 1950; Malaya British Borneo Currency Agreement, 1960 The Malayan dollar replaced the North Borneo dollar when North Borneo joined the Malayan currency union.
18 January 1965

-present

fixed (as part of currency union); uses Malaysian dollar (ringgit since 28 August 1975) Malaya, Central Bank of Malaya Ordinance, 1958; Central Bank of Malaysia (Amendment and Extension) Act, 1965 The Malaysian central bank extended its jurisdiction to Sabah and Sarawak.



Exchange rate arrangements: Malaysia

Dates Arrangement Legal basis Remarks
16 September 1963

-11 June 1967

fixed (as part of currency union); Malayan $1 = UK 2 shillings 4 pence = 0.200229g gold, or Malaysian $60 = UK£7 Malaya, Central Bank of Malaya Ordinance, 1958 Malaysia came into existence at start of this period as Malaya, Sarawak, and Sabah federated. The exchange rate arrangement previously in force in Malaya continued. Recall that the Malayan dollar was a decimal currency.
12 June 1967

-17 November 1967

hard peg; Malaysian $1 = UK 2 shillings 4 pence = 0.200229g gold Malaya, Central Bank of Malaya Ordinance, 1958 The central bank became active, hence the exchange rate changed from a fix to a hard peg. Separate currencies for Brunei, Malaysia, and Singapore replaced a unified currency. The Malaysian dollar was a decimal currency.
18 November 1967

-23 August 1971

hard peg; Malaysian $7.3469 = UK£1, or Malaysian $3.06122 = US$1, or Malaysian $1 = UK 2 shillings 8-2/3 pence = 0.290299g gold no action by Malaysia Singapore and Malaysia did not devalue with the pound sterling on 18 November 1967. Old notes, issued by the Malayan currency board, were devalued with the pound sterling, but by this time most notes in circulation in Malaysia were new Malaysian central bank notes. Malaysia registered a gold parity with the IMF on 11 November 1968. The Malaysian government suspended the foreign-exchange market on 17 August 1971 and allowed it to resume on 24 August 1971, initially in spot pounds sterling only.
24 August 1971

-19 December 1971

hard peg; Malaysian $7.3469 = UK£1, or Malaysian $1 = 0.290299g gold (nominally) Bank Negara Malaysia, decision of sometime in the period 16-23 August 1971 Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. The Malaysian dollar pegged to the pound sterling, in effect unpegging it from the US dollar.
20 December 1971

-23 June 1972

hard peg; Malaysian $7.3469 = UK£1, or Malaysian $2.81955 = US$1, or Malaysian $1 = 0.290299g gold (nominally) no action by Malaysia In effect became repegged to the US dollar after the dollar was devalued against gold on 18 December 1971. Malaysia widened its intervention rates from +/-0.75% to +/-1% around the central rate.
24 June 1972

-12 February 1973

hard peg; Malaysian $2.81955 = US$1, or Malaysian $1 = 0.290299g gold (nominally) Malaysia, decision of 24 June 1972 announced by Minister of Finance Switched to the US dollar as the anchor currency after the United Kingdom floated the pound sterling on 23 June 1972. Adopted wider margins.
13 February 1973

-20 June 1973

hard peg; Malaysian $2.5376 = US$1, or Malaysian $1 = 0.290299g gold (nominally) no action by Malaysia Did not follow the devaluation of the US dollar on 13 February 1973.
21 June 1973

-27 August 1975

managed float; Malaysian $1 = 0.290299g gold (nominally) Ceased to maintain a floor for the US dollar, so the Malaysian dollar began to appreciate. Malaysia floated to escape inflationary pressures of the time operating in the United States.
28 August 1975

-26 September 1975

managed float; 1 Malaysian ringgit = 0.290299g gold (nominally) Malaysia, Malaysian Currency (Ringgit) Act, No. 160, 21 August 1975 The act substituted the term "ringgit" for "Malaysian dollar." Ringgit is the Malay word for dollar, and the word had been on central bank notes in the Malay language since the notes were first issued in 1967.
27 September 1975

-31 March 1978

basket; 1 Malaysian ringgit = 0.290299g gold (nominally) Malaysia, government announcement of 27 September 1975 Established a basket of currencies of major trading partners as the anchor.

RR: De facto moving band of +/-2% around US dollar.

1 April 1978

-1 September 1998

basket International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members. As of 30 November 1986, Malaysia declared that the composition of the currency basket was not to be disclosed.

RR: De facto moving band of +/-2% around US dollar to July 1997. Freely floating August 1997-29 September 1998.

2 September 1998

-present

hard peg; 3.80 Malaysian ringgit = US$1 Bank Negara Malaysia, announcement of 2 September 1998 Pegged to the US dollar and imposed capital controls (later removed) to combat the East Asian financial crisis of 1997-1998. The maximum spread between buying and selling rates is 2%.



Maldives



Political sketch

Formerly the Maldive Islands. Independent from the United Kingdom on 26 July 1965.

According to tradition, Islam was adopted in the Maldives in 1153. The Portuguese forcibly established themselves in Malé (now the capital city) from 1558 until the local population expelled them in 1573. In the 1600s the islands were a sultanate under the protection of the Dutch rulers of Ceylon. After the British conquered Ceylon from the Dutch in 1796, the Maldives became a British protectorate, a status formalized in 1887. Most administrative powers rested with sultans or sultanas until 1932, when the first democratic constitution was proclaimed; however, the country remained a sultanate. A republic was proclaimed in 1953, but later that year the country reverted to a sultanate.

On 26 July 1965 the Maldive Islands became independent from the United Kingdom, and on 11 November 1968 a new republic was inaugurated and the former sultanate was abolished. The last British troops left on 29 March 1976. The economy is based on tourism and fishing. Since 1968 the country has had only two presidents; the government is in effect an autocracy.



Wars since 1500

Maldivian Expulsion of the Portuguese, 1573; Malabari Occupation, 1752; Second World War, 1939-1945 (Japan against United States, United Kingdom, Netherlands, China, and allies) (no battles in or around Maldives, but lack of shipping affected islands); Maldivian Revolt of Southern Succession, 1959-1964.



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Maldives left the sterling area on 23 June 1972.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: None listed.

Frankel and Rose (1996) list of currency crashes: 1975, 1987.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Ball (1940), Browder (1969), World Bank (1980). The Maldives Monetary Authority is working on an English translation of a historical survey currently (as of February 2004) available on its Web site only in the local Dhivehi language.

Monetary authorities: Maldives

Dates Type Name Legal basis Remarks
14 November 1947

-30 June 1981

government issue Maldives, Department of Finance (headquarters Malé, Maldives) Dhivehi Raajjeyge

Nootge Bill (Maldives Notes Bill), No. 2/66, 1966?

Before this, people used local coins (larin, fishhook-shaped silver coins minted starting in the 1600s) and foreign coins. The first bank was the State Bank of India (headquarters Bombay [now Mumbai], India), which opened a branch in Malé on 4 February 1974. The second bank is unknown to me. The IMF source says the State Trading Organization was responsible for administering the exchange rate from April 1979 until apparently 1982. Maldives joined the IMF on 13 January 1978.
1 July 1981

-present

central bank Dhivehi Raajjeyge Maalee Idharaa (Maldives Monetary Authority) (headquarters Malé, Maldives) Maldives, Maldives Monetary Authority Act, Law 6/1981, 1981 Formalized informal procedures by establishing a central bank; previously there were no explicit regulations concerning the currency.



Exchange rate arrangements: Maldives

Dates Arrangement Legal basis Remarks
1800s soft peg; Maldivian larin linked to silver but depreciated Larin (fishhook-shaped silver coins) depreciated during 1800s so that by about 1900, 22 larins = silver Spanish $1. The larin was originally the name of a Persian coin named after the city of Lar or Laristan, where it was first struck.
about 1900?

-13 November? 1947

fixed; used Ceylonese rupee and pound sterling Pound sterling notes and coins continued to circulate until 1976, when Britain withdrew from its airbase in the Maldives. The pound sterling was not a decimal currency, but the Ceylonese rupee was from 1872. (Ceylon was present-day Sri Lanka.)
14 November? 1947

-21 November 1967

hard peg; 13-1/3 Maldivian rupees = UK£1 The starting date of the period is a guess based on the date on the first notes. The Maldivian rupee was a decimal currency.
22 November 1967

-date unknown

hard peg; 11.4286 Maldivian rupees = UK£1 Did not follow the devaluation of the pound sterling on 18 November 1967. Information on this period in English is lacking. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971.
date unknown

-April 1979

hard peg, dual rate; official rate 3.93 Maldivian rupees = US$1 At an unknown date the Maldives switched to the US dollar as the anchor currency. The fluctuating commercial rate as of the end of 1976 was about 8.50 Maldivian rupees = US$1. Maldives never established a gold parity with the IMF because the system was on its way out when Maldives joined the IMF on 13 January 1978.
April 1979

-30 June 1981

officially, managed float; in practice, hard peg, 7.50 Maldivian rupees = US$1 The exchange rate was stabilized at this level, and the rate of 3.93 Maldivian rupees = US$1 was used only for some accounting purposes.
1 July 1981

-30 March 1982

Maldivian rufiyaa, officially, managed float; in practice, hard peg, 7.55 Maldivian rufiyaa = US$1 Maldives, Maldives Monetary Authority Act, Law 6/1981, 1981 Changed the name of the currency to rufiyaa when central banking began. "Rufiyaa" is Maldivian for "rupee." On 25 January 1982, the rufiyaa was made the sole legally permitted medium of exchange. An accounting rate of 3.93 Maldivian rufiyaa = US$1 was used for government transactions, but starting 25 January 1982, it was confined to purposes of valuation for import duties, and was gradually unified with the market rate.
31 March 1982

-30 June 1985

hard peg; 7.05 Maldivian rufiyaa = US$1 Revalued against the US dollar during a period of strong economic growth. Perhaps another purpose of the revaluation was to discourage use of US dollars by showing that the dollar could lose value against the rufiyaa.
1 July 1985

-28 February 1987

basket Pegged to a trade-weighted basket of currencies, initially at 7.10 Maldivian rufiyaa = US$1. The US dollar remained the intervention currency.
1 March 1987

-October 1994

managed float Floated, initially at 10.10 Maldivian rufiyaa = US$1.
October 1994

-24 July 2001

officially, managed float; in practice, hard peg at 11.77 Maldivian rufiyaa = US$1 (IMF: independent float; reclassified as managed float 1991; reclassified as conventional peg 1998) In practice, the exchange rate became a hard peg, as the annual reports of the central bank acknowledge.
25 July 2001

-present

hard peg; 12.80 Maldivian rufiyaa = US$1 Maldives Monetary Authority, announcement of 24 July 2001 Devalued to reduce selling pressure on the currency.



Mongolia



Political sketch

Independent of China on 11 July 1921.

In the 1200s Genghis Khan (Temüjin) united the Mongol tribes and established a huge empire that stretched westward across Asia. A grandson, Kublai Khan (reigned 1259-1294) established the Mongol dynasty that ruled over China. The last great Mongol leader was Ligdan Khan (reigned 1604-1634), who united many Mongol tribes to defend their homeland against the rising power of the Manchu dynasty. After he died, the Manchus subdued the Mongols and present-day Mongolia became part of China. A Mongolian national consciousness emerged in the mid 1800s.

After the fall of the Manchu (Ch'ing) dynasty in 1911, Mongol princes, supported by czarist Russia, declared Mongolia independent from China. When the first Russian revolution of March 1917 replaced the monarchy with a democratic government, Mongolia reverted to Chinese control, but in October 1920, during the Russian Civil War, a force of White Guard (pro-czarist) troops invaded Mongolia. Damdiny Sühbaatar organized a force that, with the help of the Soviet Red Army, defeated the White Guard and drove off the Chinese in 1921. The Mongolian People's Republic was officially proclaimed on 26 November 1924. Mongolia became a communist dictatorship in the orbit of the Union of Soviet Socialist Republics (USSR). It established a centrally planned economy ill suited to its pastoral conditions. For decades it remained isolated and impoverished. Mongolia joined in the democratic revolutions that swept eastern Europe and the USSR in 1990-1991. The country moved toward a market economy and held democratic elections on 29 July 1990.



Wars since 1500

Chinese War with the Khitans, 979-1004; First Chinese War with the Tanguts, 990-1003; Second Chinese War with the Tanguts, 1040-1043; Jungchen Mongol Invasion of Liao, 1114-1122; Jungchen Mongol Invasion of the Sung Empire, 1125-1162; Conquests of Genghis Khan, 1190-1227; Genghis Khan's First War with the Hsia Empire, 1206-1209; Mongol Conquests, 1206-1405; Genghis Khan's War with the Chin Empire, 1211-1215; Genghis Khan's Sack of Peking, 1215; First Mongol-Persian War, 1218-1221; Mongol Invasions of India, 1221-1398; Genghis Khan's Second War with the Hsia Empire, 1226-1229; Second Mongol-Persian War, 1230-1243; Mongol Conquest of the Chin Empire, 1231-1234; Mongol Invasions of Korea, 1231-1241; Mongol Conquest of the Sung Empire, 1234-1279; Mongol Civil War of 1260-1264; Mongol-Chinese War of 1356-1368; Manchu Conquest of China, 1618-1650; Chinese Civil War of 1621-1644; Mongol Revolts of 1755-1760; Mongolian Secession, 1911; Mongolian War of Independence, 1920-1921 (against China and Russian White Guard forces); Mongolian Anticommunist Rebellion, 1932; Japanese-Soviet Border Clashes, 1939; Second World War in the Pacific, 1945 (Mongolia declared war on Japan on 10 August, shortly before the war ended, and helped the Union of Soviet Socialist Republics occupy Manchuria).



Convertibility

Under central planning, Mongolia's currency was inconvertible.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Problems during the transition from central planning to a market economy, 1991-2000, such as the Agricultural Bank apparently failing twice.

Frankel and Rose (1996) list of currency crashes: Mongolia not included.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Dupuy, Blanchard, and others (1970), Milne and others (1991).



Monetary authorities: Mongolia

Dates Type Name Legal basis Remarks
1924

-1930

central bank (with commercial banking functions) Burud Nayramdakh or Mongolbank (Mongolian Trade-Industrial Bank) / Ulsvin Bank or Mongolbank (nickname) (State Bank of the Mongolian People's Republic) from April? 1954 (headquarters for all Ulan Bator, Mongolia) Mongolia, law of 2 June? 1924 Until April 1954, this bank was a joint venture with the Soviet government; then it became entirely owned by the Mongolian government. The first coins were issued in 1925. Dupuy and Blanchard (1970) remark that "From 1900 to 1920, a variety of foreign banks handled the country's confused currency transactions." These included the Ta Ching Bank and Chu-kuo Yin-han, both Chinese; the Russo-Asiatic Bank, and the Russian-owned and -operated Mongolian National Bank.
1930

-30 April 1991

monobank Ulsvin Bank or Mongolbank (nickname) (State Bank of the Mongolian People's Republic) (headquarters Ulan Bator, Mongolia) The central bank became a monobank as part Mongolia's implementation of central planning.
1 May 1991

-present

central bank Mongolbank (Bank of Mongolia) (headquarters Ulan Bator, Mongolia) Mongolia, Banking Law, August 1990 Mongolia ended the monobank system as part of its movement to a market economy. The commercial banking activities of Mongolbank spun off as the Bank for Investment and Technological Revolution, which began in May 1991, and the State Bank of Mongolia (International), which began later in 1991 (headquarters for both Ulan Bator, Mongolia). Mongolia joined the IMF on 14 February 1991.



Exchange rate arrangements: Mongolia

Dates Arrangement Legal basis Remarks
to December 1925 mainly barter, with some use of Chinese and foreign currencies Mongolia was a very poor pastoral society, most of whose people had little use for money.
December 1925

-1927

hard peg, multiple rates (controlled); 1 Mongolian tughrik = 1.314 Soviet rubles Mongolia, law of 22 February 1925 Introduced a national currency. "Tughrik" comes from the Mongolian word for "wheel." By Mongolia, government announcement of 1 April 1928, the Mongolian tughrik was made the only acceptable currency. The tughrik was a decimal currency.
1927

-31 December 1960

hard peg, multiple rates (controlled); 1 Mongolian tugrik = 1 Soviet ruble = 0.222168g gold (nominally) Devalued against the Soviet ruble, but because the exchange rate was controlled, this measure did not have the same significance it would have had in a market economy.
1 January 1961

-July 1990

hard peg, multiple rates (controlled); 4.444 Mongolian tughriks = 1 (new) Soviet transferable ruble, or 1 Mongolian tughrik = 0.222168g gold (nominally) (to 1970s) no action by Mongolia The Union of Soviet Socialist Republics redenominated its currency at 10 old Soviet rubles = 1 new Soviet ruble and devalued the ruble, for purposes of foreign trade only, from 10 old Soviet rubles = US$2.50 to 1 new Soviet ruble = US$1.10. Therefore, the new rate for the Mongolian tugrik came about without any action on the part of Mongolia. The new main rate implied a cross rate of 4 Mongolian tughriks = US$1. There was also a retail rate of 4.18 Mongolian tughriks = 1 Soviet ruble from 1963. From 1988, there was also a noncommercial rate of 20 Mongolian tughriks = US$1. Convertibility was severely limited.
July 1990

-1 August 1990

soft peg, multiple rates; "base rate" 5.63 Mongolian tughriks = US$1 Switched anchor currency to US dollar as part of a transition to a market economy.
2 August 1990

-13 February 1991

soft peg, multiple rates; commercial rate 5.56 Mongolian tughriks = US$1 The commercial rate, for market-oriented trade, was the most important rate. It was adjusted in accord with movements of the US dollar against other currencies.
14 February 1991

-15 April 1991

soft peg, multiple rates; commercial rate 5.48 Mongolian tughriks = US$1 Revalued the commercial rate in accord with the movement of US dollar.
16 April 1991

-9 June 1991

soft peg, multiple rates; commercial rate 7.10 Mongolian tughriks = US$1 Devalued the commercial rate substantially and ceased making frequent adjustments to it.

RR: Freely floating.

10 June 1991

-29 February 1992

soft peg, multiple rates; commercial rate 40 Mongolian tughriks = US$1 Simplified the exchange rate structure by devaluing the commercial rate and unifying it with the "noncommercial" rate, which was already 40 Mongolian tughriks = US$1.

RR: Freely floating.

1 March 1992

-26 May 1993

soft peg, dual rate; commercial rate 40 Mongolian tughriks = US$1 Devalued the "barter" rate, for trade with centrally planned economies, and unified it with the commercial rate. The barter rate was formerly 7.10 Mongolian tughriks = US$1.

RR: Freely floating .

27 May 1993

-13 December 1998

managed float (IMF: independent float) Floated and unified the exchange rate.

RR: Freely falling to August 1997. From September 1997, de facto crawling band of +/-2% around US dollar.

14 December 1998

-present

Mongolian togrog, managed float (IMF: independent float, reclassified as managed float 31 December 2001) Renamed the currency.

RR: De facto crawling band of +/-2% around US dollar to December 2001, when data end.



Nepal



Political sketch

Modern Nepal dates from the conquest of the Nepal Valley in 1769 by the Gurkha people, whose leader Prithvi Narayan Shah moved the capital to Kathmandu. From 1775 to 1951 Nepali politics was characterized by conflict between the royal family and several noble families. The British conquest of India forced the Nepali rulers to seek an accommodation with the British to preserve their independence. In 1860 an agreement was reached that permitted the recruitment of Nepalis for service in the British Indian Army. Nepal remained largely isolated from the rest of the world. In 1950, Nepalis living in India formed an alliance with members of the royal family to oust the Rana regime, the dominant noble family since 1846. With support from the Government of India, the royal family retook power. Starting in 1956, the government began extensive economic planning. A constitution was approved in 1959, and parliamentary elections were held. Controversy arose between the crown and the cabinet in 1960, and the king dismissed the parliament and imprisoned many of its members. In 1962 a new constitution gave the king much greater authority. Though the country was nominally a constitutional monarchy, the king for many years exercised autocratic control. He dominated the cabinet and much of the parliament without opposition because political parties were banned under the constitution. Maoist guerillas have been waging war on and off since 1966 to overthrow the monarchy and impose a communist dictatorship; the most recent wave of attacks began in February 1996. In 1990, a series of demonstrations and protests against the king of the time forced him to lift the ban on political parties and to accept a new cabinet composed largely of opposition political figures. That year a new constitution was also approved that provided for a multiparty democracy. The average tenure of prime ministers since then has been about one year. Nepal remains poor and relatively isolated. It economy is predominantly agricultural, though tourism has become important.



Wars since 1500

Gurkha Conquests, 1744-1768; Gurkha Invasion of Tibet, 1788-1792; Gurkha Conquest of Kangra, 1809; Gurkha War, 1814-1816 (Nepali Gurkhas against United Kingdom); Rebellion of the Nepali National Congress (political party), 1950-1951; Rebellion of the Nepali National Congress (political party), 1961-1962; Nepal Communist Guerilla Insurgency, 1966-present (2003).



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

Nepal was part of Indian exchange control territory until it introduced what was apparently its first exchange control act in 1960 (Nepal, Foreign Exchange Act of 1960). Nepal restricted the previously unlimited convertibility of Nepalese rupees into Indian rupees starting 10 July 1989.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: in early 1998, arrears to three largest banks were 29% of assets.

Frankel and Rose (1996) list of currency crashes: None.



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Hamal (1972), Pant (1970), Sharma (1987).



Monetary authorities: Nepal

Dates Type Name Legal basis Remarks
1937

-1945

dollarization Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India]) The first bank was the government-owned Nepal Bank Limited (headquarters Kathmandu, Nepal), in Kathmandu, in 1937. It was established by Nepal, Nepal Bank Act, 1937. The first coins were issued in the 500s.
1945

-25 April 1956

government issue alongside dollarization government of Nepal (headquarters Kathmandu, Nepal) alongside Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India]) The Indian rupee continued to be legal tender and to be widely used.
26 April 1956

-16 August 1963

central bank alongside dollarization Nepal Rastra Bank (headquarters Kathmandu, Nepal) alongside Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India]) Nepal, Nepal Rastra Bank Act (or Ain), 1955; Nepal Rastra Bank (Second Amendment) Act, 13 July 1960 The central bank began operations, but did not take over exchange rate stabilization from Nepal Bank Limited until 20 June 1956. Nepal joined the IMF on 6 September 1961.
17 August 1963

-present

central bank Nepal Rastra Bank (headquarters Kathmandu, Nepal) Nepal, Foreign Exchange Regulation Act, 1962 The Foreign Exchange Regulation Act prohibited the use of Indian currency for internal payments, though the act was initially enforced only loosely outside of cities in the Kathmandu valley. By 17 October 1966, enforcement had spread to the whole country. The Indian rupee ceased to be legal tender on 17 October 1966. Th e second bank was the government-owned Rastriya Vanijya Bank (headquarters Kathmandu, Nepal), in Kathmandu, on 13 January 1966.



Exchange rate arrangements: Nepal

Dates Arrangement Legal basis Remarks
about 1857

-1930

fixed; used Indian rupee alongside Nepalese rupee at about 1.28 Nepalese rupees = 1 Indian rupee The value of the Nepalese rupee fluctuated only slightly up to about 1930.
1930

-September 1952

managed float The value of Nepalese rupee fluctuated greatly in this period. By 1939 it was 1.54 Nepalese rupees = 1 Indian rupee; during the Second World War the rate appreciated to 0.65 Nepalese rupees = 1 Indian rupee, but the rate then depreciated. The first decimal coins were issued in 1932.
September 1952

-17 April 1955

hard peg; 1.28 Nepalese rupees = 1 Indian rupee officially, de facto floating Nepal, government announcement of September 1952 The government pegged the Nepalese rupee to the Indian rupee. The market rate was about 1.60 Nepalese rupees = 1 Indian rupee, but the official rate could be used for paying taxes.

RR: Managed float.

18 April 1955

-28 April 1955

soft peg; 1.755 Nepalese rupees = 1 Indian rupee (but see Remarks) The exchange rate in the market was in truth more or less floating until 1960, say sources.

RR: Managed float.

29 April 1955

-2 April 1956

soft peg; 1.745 Nepalese rupees = 1 Indian rupee First of a series of revaluations against the Indian rupee.

RR: Managed float.

3 April 1956

-13 April 1956

soft peg; 1.645 Nepalese rupees = 1 Indian rupee Revalued.

RR: Managed float.

14 April 1956

-29 June 1956

soft peg; 1.545 Nepalese rupees = 1 Indian rupee Revalued.

RR: Managed float.

30 June 1956

-5 August 1956

soft peg, dual rate; 1.505 Nepalese rupees = 1 Indian rupee Information on the dual rate is unclear; the dual rate may actually have started in one of the three previous changes of the exchange rate.

RR: Managed float.

6 August 1956

-27 December 1956

soft peg, dual rate; 1.455 Nepalese rupees = 1 Indian rupee Revalued.

RR: Managed float.

18 December 1956

-20 January 1957

soft peg, dual rate; 1.405 Nepalese rupees = 1 Indian rupee Revalued.

RR: Managed float.

21 January 1957

-13 March 1957

soft peg, dual rate; 1.355 Nepalese rupees = 1 Indian rupee Revalued.

RR: Managed float.

14 March 1957

-18 August 1958

soft peg, dual rate; 1.305 Nepalese rupees = 1 Indian rupee Revalued.

RR: Managed float.

19 August 1958

-12 April 1960

soft peg, dual rate; 1.505 Nepalese rupees = 1 Indian rupee, with fluctuations Nepal, government announcement of April 1955 A second rate applied to purchases of airline tickets only. There may have been other, rather small changes to the exchange rate in this period that the sources do not list.
13 April 1960

-5 June 1966

hard peg; 1.60 Nepalese rupees = 1 Indian rupee Nepal, government announcement of April 1960 The Nepalese government decided on a pegged exchange rate.
6 June 1966

-10 December 1967

hard peg; 1.0155 Nepalese rupees = 1 Indian rupee Did not devalue along with India on 6 June 1966. Nepal had an asymmetrical spread, with a buying rate of 1.0125 Nepalese rupees = 1 Indian rupee and a selling rate of 1.0160 Nepalese rupees = 1 Indian rupee.
11 December 1967

-21 December 1971

hard peg; 1.35 Nepalese rupees = 1 Indian rupee, or 10.125 Nepalese rupees = US$1, or 1 Nepalese rupee = 0.08777g gold Nepal, government announcement of 11 December? 1967 Belatedly followed India's devaluation of 6 June 1966 after an economic slowdown occurred. Nepal also registered a gold parity with the IMF at the start of this period. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971.
22 December 1971

-13 May 1972

hard peg; 1.391 Nepalese rupees = 1 Indian rupee, or 10.125 Nepalese rupees = US$1, or 1 Nepalese rupee = 0.08777g gold (nominally) When the United States devalued the US dollar against gold on 18 December 1971, Nepal did not devalue against gold, but neither did it revalue agains the dollar. Instead, it devalued slightly against the Indian rupee.
14 May 1972

-19 February 1973

hard peg; 1.39075 Nepalese rupees = 1 Indian rupee, or 10.125 Nepalese rupees = US$1, or 1 Nepalese rupee = 0.0808408g gold (nominally) Devalued against gold and adopted wider margins.
20 February 1973

-8 October 1975

hard peg; 1.39075 Nepalese rupees = 1 Indian rupee, or 10.56 Nepalese rupees = US$1, or 1 Nepalese rupee = 0.0808408g gold (nominally) Nepal altered the exchange rate against the US dollar to avoid broken cross rates.
9 October 1975

-21 March 1978

hard peg; 1.39075 Nepalese rupees = 1 Indian rupee, or 12.50 Nepalese rupees = US$1, or 1 Nepalese rupee = 0.0808408g gold (nominally) Devalued against the US dollar but not the Indian rupee, again to avoid broken cross rates.
22 March 1978

-29 March 1978

hard peg; 1.45075 Nepalese rupees = 1 Indian rupee, or 12 Nepalese rupees = US$1; gold parity inoperative Revalued against the US dollar and devalued against the Indian rupee to avoid broken cross rates.
30 March 1978

-31 March 1978

hard peg, dual rate; 1.45075 Nepalese rupees = 1 Indian rupee, or 12 Nepalese rupees = US$1; gold parity inoperative Replaced certain existing arrangements with a second exchange rate of 16 Nepalese rupees = US$1.

RR: De facto crawling band of +/-5% around US dollar / dual market.

1 April 1978

-18 September 1981

hard peg, dual rate; 1.45075 Nepalese rupees = 1 Indian rupee, or 12 Nepalese rupees = US$1 International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members.
19 September 1981

-16 December 1982

hard peg, dual rate; 1.45075 Nepalese rupees = 1 Indian rupee, or 13.20 Nepalese rupees = US$1 Devalued against the US dollar to avoid broken cross rates. Ended the dual rate with respect to US dollar, but the dual rate overall remained.

RR: De facto crawling band of +/-2% around US dollar.

17 December 1982

-30 May 1983

hard peg, dual rate; 1.45075 Nepalese rupees = 1 Indian rupee, or 14.30 Nepalese rupees = US$1 Devalued against the US dollar to avoid broken cross rates.

RR: De facto crawling band of +/-2% around US dollar.

1 June 1983

-3 March 1992

officially, basket; in practice, hard peg to Indian rupee Nepal unified the exchange rate and adopted a trade-weighted basket as the official anchor. On 30 November 1985, Nepal devalued from 17.50 Nepalese rupees = US$1 to 20.50 Nepalese rupees = US$1 and from 1.45075 Nepalese rupees = 1 Indian rupee to 1.70 Nepalese rupees = 1 Indian rupee. Nepal revised the basket on 31 May 1986. The IMF source notes that the basket operated in practice as a hard peg to the Indian rupee.

RR: De facto crawling band of +/-2% around US dollar.

4 March 1992

-11 February 1993

basket, dual rate Introduced a dual exchange rate as a measure to aid economic reforms.

RR: De facto crawling band of +/-5% around US dollar.

12 February 1993

-present

hard peg; 1.60 Nepalese rupees = 1 Indian rupee (IMF: basket, reclassified to single currency peg 31 October 1997) Officially pegged to the Indian rupee and unified the exchange rate. The US dollar remained the intervention currency.

RR: Peg to US dollar with parallel market premiums in 10-20% range to June 1995. From July 1995-December 2001, when data end, de facto crawling band of +/-2% around US dollar. Periods of pegging interspersed with moderate devaluations. Parallel market premiums in single digits since September 1997.



Oman



Political sketch

Formerly Muscat and Oman.

The Portuguese gained control of the fort of Muscat in 1507. They were aided by divisions among the Omanis. In 1624, Nasr ibn Murshid became the chief religious leader (imam) and political leader, and by 1650 he ousted the Portuguese. In the early 1700s, civil war broke out. The war ended in 1744 after both sides chose Ahmad ibn Sa'id as imam. His successors, who came to be called sultans, created a substantial empire in Oman and East Africa, and for a time the Omani capital was in Zanzibar. After 1861, Oman and Zanzibar were ruled separately. The sultan of Oman also owned the small enclave of Gwadur, Pakistan, which was sold to Pakistan in 1958. Tribes in the interior of Oman frequently clashed with the sultan by supporting the elected imam of the Ibadi sect of Islam. In 1959, the last Ibadi imam was evicted from Oman.

British protection of Oman ended in 1965. Oil had been discovered in the 1930s, but Oman did not begin exporting it until 1967. It is the main source of export revenue. On 2 January 1972, Qabus ibn Sa'id (who is still in power as of 2004) overthrew his father as sultan and rapidly began to modernize the government and economy. An uprising by left-wing guerrillas in the Dhofar region, aided by Southern Yemen, was defeated in 1975. Oman remains a monarchy, although in November 1991 the sultan established a Consultative Council to broaden public participation in politics.



Wars since 1500

Omani-Persian War, 1742-1744; Omani Expansion in East Africa, 1822-1824; Omani Attacks on Mombasa, 1829, 1833, 1837; Omani Civil War, 1856-1868; Omani Tribal Uprising of 1913; First Dhofar Uprising, 1955; Second Dhofar Uprising, 1964-1975.



Convertibility

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914, gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925, the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973, the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong abandoned sterling as its anchor currency. The sterling area ended in 1979 when the United Kingdom abolished exchange controls.

In the states of the Arabian Peninsula, gold and silver coins, particularly gold British sovereigns and silver Maria Theresa thalers, continued to be widely used into the 1960s even after local note currencies and coins were established. In late 1965, India ceased making rupee coins from the Persian Gulf region convertible into the pound sterling, although notes remained convertible. For a brief period beginning in mid January 1966, Bahrain made its coins available to other Gulf states to fill the gap left by the withdrawal of Indian coins from circulation (Anonymous 2002). These coins may have circulated in Oman but there does not seem to have been any special arrangement between the governments of Bahrain and Oman about them.

The Indian rupee was widely used in the countries of the Persian Gulf and Arabian Peninsula in the early and mid 1900s (and in some cases even earlier). The government of India established a separate currency, the Gulf rupee, for circulation exclusively outside the country (India, Reserve Bank of India [Amendment] Act, 1 May 1959). In doing so, the government hoped to reduce the drain on its foreign reserves from gold smuggling with the countries of the Persian Gulf. After India devalued the rupee on 6 June 1966, the countries using the Gulf rupee--Oman, Qatar, and what are now the United Arab Emirates--decided to replace the Gulf rupee with national currencies. Kuwait had already done so in 1961, and Bahrain had done so in 1965.

Following India's devaluation of the rupee on 6 June 1966, the British Bank of the Middle East established an exchange control system by March 1967 to restrict the importation of Gulf rupees from elsewhere. The sultan of Oman had promised to pay the difference between the predevaluation exchange rate of the Gulf rupee and its postdevaluation rate (Oman, sultan's announcement of 19 June 1966). The exchange controls ceased when the bank assisted the government in introducing a new currency on 7 May 1970. Oman left the sterling area on 23 June 1972.



Other

Defaults on or restructurings of debt to the foreign private sector: None.

Banking crises: Apparently none.

Frankel and Rose (1996) list of currency crashes: None.

No exchange rate data in Reinhart and Rogoff (2002).



References

Primary sources: See the publications of the monetary authorities, and the laws listed in the "Legal basis" column.

Main secondary sources: Central Bank of Oman (1995), Darley-Doran (1990), Jones (1987), Presley and Wilson (1991).



Monetary authorities: Oman

Dates Type Name Legal basis Remarks
September 1948

-21 June 1959

dollarization Indian rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India]), and to some extent other foreign currencies, especially Silver Maria Theresa thalers Oman, Banking Agreement between Sultan of Oman and the Imperial Bank of Iran, 10 July 1948 The first bank was the Imperial Bank of Iran (later the British Bank of the Middle East) (headquarters London, England), in Muscat, in September 1948. The government granted it a monopoly of banking, which lasted almost 20 years. The second bank was apparently the Eastern Bank (headquarters London, England), in Muscat, on 13 July 1968. The first coins were issued in 708, the first modern coins in 1893.
22 June 1959

-6 May 1970

dollarization (another type) Indian-issued Gulf rupee (issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India]) and other foreign currencies India, Reserve Bank of India (Amendment) Act, 1 May 1959 India issued special rupee notes for use around the Persian Gulf to reduce the drain on its foreign reserves from gold smuggling with Gulf states.
7 May 1970

-31 March 1975

currency board Muscat Currency Authority / Oman Currency Board from 11 November 1972 (headquarters for both Muscat, Oman) Oman, Currency Decree of 1970; royal decree of November 1972 In a much belated response to the devaluation of the Indian rupee on 5 June 1966, Oman established a national monetary authority much later than other Persian Gulf sheikdoms. The British Bank of the Middle East operated the currency board under the supervision of the government's Secretary for Financial Affairs. Oman joined the IMF on 23 December 1971.
1 April 1975

-present

central bank Bank al-Markaz al-'Umn (Central Bank of Oman) (headquarters Muscat, Oman) Oman, Banking Law, 1 December 1974 Established a central bank in accord with the conventional ideas of the time on monetary policy.



Exchange rate arrangements: Oman

Dates Arrangement Legal basis Remarks
about 1900

-21 June 1959

fixed; used own and foreign coins Oman issued local coins. Silver Indian rupees were used widely on the coast and silver Maria Theresa thalers were widely used in the interior of the country. In the early 1900s, trade accounts were kept in an imaginary currency. Its units were 1 "white mohammedi" = 20 gaz; 11.5 white mohammedis = 1silver Maria Theresa thaler = 20.5 "black mohammedis." The white mohammedi was used as a unit of account in retail trade, the black mohammedi in wholesale trade. In 1948, the government issued its first recent silver coin, the half rial Dhofari; it was equal to half a Maria Theresa thaler. In 1958, the government issued the rial Saidi, initially equal in silver content to the Maria Theresa thaler. "Rial" comes from the Spanish "real" coin, also known as the Spanish silver dollar, peso, piastre, or piece of eight. The Indian rupee became a decimal currency 1 April 1957.
22 June 1959

-18 June 1966

fixed; used Indian-issued Gulf rupee and other foreign currencies India, Reserve Bank of India (Amendment) Act, 1 May 1959 India issued special rupee notes for use around the Persian Gulf to reduce the drain on its foreign reserves from gold smuggling with Gulf states.
19 June 1966

-6 May 1970

fixed; 13-1/3 (Omani) Indian-issued Gulf rupees = UK£1; also used other foreign currencies Oman, sultan's announcement of 19 June 1966 Oman maintained Gulf rupees within its borders at the rate existing before India's devaluation of 6 June 1966. India devalued the Indian rupee and Gulf rupee alike to approximately 21.05 Indian rupees = UK£1.
7 May 1970

-22 August 1971

fixed, dual rate; official rate 1 (new) rial Saidi = UK£1 = 2.13281g gold Oman, Currency Decree of April 1970 Oman introduced a national currency. The rial Saidi was a decimal currency, divided into 1,000 baisa. Gulf rupees still in Oman were exchanged at 13-1/3 Gulf rupees = 1 rial Saidi. Oman's dual exchange rate mimicked the dual rate of the pound sterling at the time.
23 August 1971

-20 December 1971

fixed, dual rate; official rate 1 rial Saidi = UK£1 = 2.13281g gold (nominally) Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971.
21 December 1971

-25 June 1972

fixed, dual rate; official rate 1 rial Saidi = UK£1 = US$2.60571 = 2.13281g gold (nominally) Oman became a member of the IMF on 23 December 1971, shortly after the United States devalued the US dollar against gold on 18 December 1971. Oman did not register a gold parity with the IMF until 1974, although one existed in national law. The exchange rate with the US dollar listed was the effective parity.
26 June 1972

-10 November 1972

fixed, dual rate; official rate 1 rial Saidi = US$2.60571 = 2.13281g gold (nominally) Ceased using the pound sterling as the anchor currency after the United Kingdom floated the pound sterling on 23 June 1972.
11 November 1972 -19 February 1973 fixed, dual rate; official rate 1 rial Omani = US$2.60571 = 2.13281g gold (nominally) Oman, Currency Decree of 1972 Changed the name of the currency and issued new designs to reflect the change in the name of the country from the Sultanate of Muscat and Oman to the Sultanate of Oman. The change of country name had occurred on 9 August 1970. The riali Saidi ceased to be legal tender on 25 November 1976 (Oman, government notification of 1 December 1975).
20 February 1973

-31 March 1975

fixed; 1 rial Omani = US$2.89524 = 2.13281g gold (nominally) Oman, government announcement of 26 February 1973 Did not follow the devaluation of the US dollar on 13 February 1973. Also in February 1973, perhaps at this time, Oman unified the official and free rates for the US dollar after the free rate appreciated. Oman registered a gold parity with the IMF on 4 July 1974. It adopted wider margins.
1 April 1975

-31 March 1978

hard peg; 1 rial Omani = US$2.89524 = 2.13281g gold (nominally) Oman, Banking Law, 1 December 1974 Replaced the currency board, with a central bank, hence the exchange rate changed from fixed to a hard peg.
1 April 1978

-24 January 1986

hard peg; 1 rial Omani = US$2.89524 International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") The system of gold par values officially ended by agreement of IMF members.
25 January 1986

-present

hard peg; 1 rial Omani = US$2.6008 Devalued during a period of falling oil prices and resulting economic difficulty.



Pakistan



Political sketch

Formerly the Indian provinces of Sindh, Balochistan, and the North-West Frontier, also parts of Punjab and Kashmir; also formerly known as West Pakistan. Independent from the United Kingdom on 15 August 1947.

The early modern history of Pakistan is similar to that of India. In the 1400s Muslim power was consolidated into a sultanate centered on Delhi that continued to rule most of the subcontinent until the early 1500s . The Mughal dynasty controlled the subcontinent between 1526 and 1761. The British East India Company ousted other colonial powers and then subdued the Mughal state in 1757. For a century the East India Company controlled most of the subcontinent, but in 1858 the British government assumed responsibility for the region following the 1857 mutiny of the Indian recruits in the Bengal army. During the period of British colonial rule, what is now Pakistan, which is overwhelmingly Muslim, was administr