Abstract
This is a study of exchange market pressure against the pound sterling during the inter-war period. The main findings are that (a) the behavior of U.K. fundamentals relative to those of the U.S.A. helps to explain exchange market pressure against the pound; (b) during the run-up to devaluation in September 1931 the monetary authorities in the U.K. were acting to reduce domestic credit; but (c) additional pressure was brought against the pound from speculative sources. These findings relate to current thinking on the choice of exchange rate regime as even well-behaved fundamentals may not be sufficient to sustain a currency on its peg.
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