BASKET PEGS AND EXCHANGE RATE REGIME CHANGE: AUSTRALIA AND NEW ZEALAND IN THE MID-SEVENTIES

Authors


  • Earlier versions of this paper were presented at the Asia Pacific Economic and Business History Conference, Sydney, 2007, the New Zealand Historical Association Conference, Wellington, 2007, and a workshop on ‘Exchange Rate Regimes in Historical Perspective’, University of Glasgow, March 2009. We thank the participants at these sessions together with the Reserve Bank of New Zealand Knowledge Centre and Statistics Unit, the Bank of England Archive, the Reserve Bank of Australia, Archives New Zealand, the National Archives of Australia and their staff. Thanks also to Gary Hawke and Lyndon Moore for comments on an earlier draft. The research is partly funded by the ESRC World Economy and Finance programme, RES-165-25-0004 and benefited from the research assistance of Dr Niall MacKenzie.

Abstract

The adoption of a basket peg by China in July 2005 raised interest in this form of exchange rate regime. This paper explores the emergence of the basket peg in the early 1970s, using New Zealand and Australia as case studies to examine why it was adopted, how it operated, and their policy-makers' use of it to influence various goals. We highlight the complexity of regime choice following the collapse of Bretton Woods. For Australia and New Zealand, the basket peg was a plausible (although interim) solution when they were reluctant either to peg to a single currency or float.

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