Writing a History of the Bank of Finland

1. Writing a History of the Bank of Finland Juha Tarkka Bank of Finland

2. The Bank of Finland history project • The Bank of Finland history project was started in 2004 • Immediate reason: Bank’s 200th anniversary in 2011 • Team of two researchers (Antti Kuusterä, Juha Tarkka) • The aim: well-researched, objective monograph on the Bank’s development… • …in the context of economic policy and financial developments in Finland and abroad • Governance: an editorial committee, 50% external • Currently, we are writing about the World War II period • History will appear also in Swedish and English

3. Some observations on the history of the BoF: • Established by the Russian Emperor in 1811, after Finland was separated from Sweden • The only bank in the country until the 1860’s • Own currency (markka) obtained in 1860, decoupled form the rouble in 1865 • Control of the Bank transferred to the Finnish parliament in 1867 (following the Swedish model) • On the gold standard in 1878-1914 • Classical central banking model adopted by the 1890’s • Finland independent in 1917, big inflation in 1917-1922 • On the gold standard since 1926, sterling block 1933-

4. Some observations on the history, continued • War finance and inflation in 1939-1952 • Joining Bretton Woods 1952, convertibility in 1958 • Economic integration with the West predominant, taking into account the delicate relationship with the Soviets • But, extensive financial regulation of interest rates, the money market, and capital flows maintaned until the 1980’s • Deregulation in the 1980’s (about 1987) and crisis in 1991 • The Bank was the first line of defence in dealing with the crisis (taking over the third largest commercial bank) • Floating of the markka in 1992, inflation target 1993- • EU 1995, ERM 1996, EMU 1999

5. Previous work on the Bank of Finland’s history • 100th anniversary history by Emil Schybergson (1914) • available in Finnish, Swedish, Russian, German • ”from modest beginnings to a grand institution” • 125th anniversary history by A.E. Tudeer (1939) • covers 1911-1936 • available in Finnish, Swedish, English, German • 150th anniversary history by Hugo Pipping (1961, 1969) • only covers 1811-1914, available in Finnish, Swedish • Vol. I titled ”From paper rouble to gold mark” • No comprehensive treatment of the post-war period available

6. What can we add? • For the earlier period, new interpretation from today’s perspective is essential • The received views of the Bank of Finland emphasize ”national stories” • The bank as part of the development to independence • Economic rationality/orthodoxy vs. politics/democracy • The bank as bulwark of anti-keynesianism or a captive of of export interests (the debate on the devaluation cycle) • We want to look at the bank and the currency in an international context • For the later period, work on new archival material very important (e.g. parliamentary council transcripts) • Also new research available in general (political) history

7. Remarks on the approach • Initially , the monetary history approach was tempting • A lot of historical time series were compiled in the 1990’s • We ended up choosing a narrative, eclectic approach • A unified text (monograph) as an aim • Dangers of the economist’s approach • Filtering: you ignore what your framework lacks • Anachronism: you impose today’s concepts on the past • History can enrich the economist’s framework only if • A genuinely historical approach is followed • People, changing motives and events are in the picture