Political sketch
Formerly the Union Group. A self-governing territory in association with New Zealand.
Tokelau was probably settled from Samoa by drift voyages. The first European visitor was the British commodore John Byron in 1765. Whalers began visiting the islands in the 1820s. In 1863 Peruvian slave raiders abducted many islanders, and roughly contemporary outbreaks of disease reduced the population to about 200. Beachcombers of diverse nationalities subsequently settled and intermarried with Tokelauans. British interest began in 1877, when the high commissioner in Fiji received jurisdiction over British nationals in Tokelau, and in 1889 Tokelau became a British protectorate. On 29 February 1916, under the name Union Group, Tokelau became part of the Gilbert and Ellice Islands Colony. The United Kingdom granted New Zealand jurisdiction over Tokelau on 1 October 1925. The islands were separated from the Gilbert and Ellice Islands, and New Zealand administered the group from Western Samoa. On 1 January 1949 Tokelau was made part of New Zealand. In December 1976 the islands were officially named Tokelau, rather than the Tokelau Islands as before. Their economy consists largely of subsistence farming and fishing. The population is about 1,500 people.
Wars since 1500
None.
Convertibility
The sterling area:
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 United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.
New Zealand alone:
On 5 August 1914, shortly after the First World War began, an amendment to the Banking Act empowered the Governor-General in Council (that is, the cabinet), to issue a proclamation declaring any banknotes to be forced tender. While any such proclamation was in effect, coined gold could not be exported without the consent of the minister of finance. From 5 August 1914-5 November 1919, it was also prohibited to export uncoined gold without his consent. Immediately after the amendment passed, the government issued a proclamation making bank notes forced tender from 6 August-6 September 1914. The government extended the proclamation from time to time (New Zealand official yearbook 1937: 572). New Zealand in effect resumed the gold standard when the United Kingdom resumed on 13 May 1925.
On 20 January 1933, the exchange rate was depreciated. Exporters received the new rate, which was more favorable to them, while exporters of capital continued to receive the old rate (New Zealand official yearbook 1937: 575). The dual rate ended on 1 August 1934. On 5 December 1938, New Zealand's government authorized the central bank not to convert notes into pounds sterling at the official exchange rate, thereby introducing exchange controls that became effective on 7 December 1938. In July 1939, the central bank introduced regulations that deferred remittances on all overseas funds except those for the national government and payment of foreign debt owed by local governments. (Local governments, as elsewhere in British colonies and former colonies, often issued securities in London.) Before July 1939, a system of permits for foreign exchange existed, but they did not limit the period during which remittances could be made. The Finance Emergency Regulations, April 1940, eliminated the free exchange market and forbade transactions at other than official rates. They were replaced by the Finance Emergency Regulations (No. 2), June 1940. Amendments introduced on 9 March 1950 greatly loosened controls as they applied to the sterling area.
New Zealand left the sterling area on 23 June 1972. It removed most exchange controls on 24 December 1984, and removed all remaining controls on 1 February 1990 (New Zealand official yearbook 1985: 790; IMF ARER 1991: 352).
Other
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): None.
Frankel and Rose (1996) list of currency crashes: Country not listed.
No exchange rate data in Reinhart and Rogoff (2003).
References
Primary sources:
--Laws and decrees:
New Zealand. Gazette. 1856-present. New Zealand Gazette (Maori title Te Kahiti o Aotearoa). Auckland, later Wellington: Government Printer. Recent issues are available at <http://www.gazette.govt.nz/diawebsite.nsf/wpg_URL/Services-New-Zealand-Gazette-Index?OpenDocument>.
--Publications of monetary authorities:
Reserve Bank of New Zealand. Annual report. 1935-present. Report of the First Ordinary General Meeting (1935); Annual Report of the Board of Directors and Statement of Accounts for the year ended 31st March (1936, 1938, and 1952-1953); Report of the Board of Directors for the year ended 31st March (1937 and 1939-1952); Annual Report of the Board of Directors and Statement of Accounts for the year ended 31st March (1954-1964; this is from the title page; the cover says simply Annual Report); Annual Report of the Directors and Statement of Accounts for the year ended 31st March (1965-1989); Annual Report and Financial Statements for the year ended 31st March (1990-present). Wellington: Reserve Bank of New Zealand.
Reserve Bank of New Zealand. Bulletin. 1938-present. Statistical Summary (1938-1950); Bulletin (1951-present). Wellington: Reserve Bank of New Zealand.
--Web site of the current monetary authority (viewed January 2005):
<http://www.rbnz.govt.nz>
--Other publications or Web sites:
New Zealand. Report on Tokelau. 1906?-present. Cook Islands Department, Cook and Other Islands (1906?-1941); not published 1942-1944; Department of Island Territories, Cook Islands (1944/1945-46/1947); Department of Island Territories, Tokelau Islands: Annual Report for the Year Ended 31st March ... (1947/1948/1951/1952); Department of Island Territories, Reports on the Cook, Niue, and Tokelau Islands (1952/1953-1964/1965); Department of Island Territories, Reports on Niue and the Tokelau Islands (1966/1967); Maori and Island Affairs Department, Reports on Niue and the Tokelau Islands (1967/1968); Department of Maori and Island Affairs, Reports on Niue and the Tokelau Islands (1968/1969-1973/1974); Ministry of Foreign Affairs, Report on the Tokelau Islands for the Year Ended 31 March ... (1975/1976); Ministry of Foreign Affairs, Tokelau, Report of the Ministry of Foreign Affairs for the Year Ended 31 March ... (1976/1977-1989/1980); Administrator of Tokelau, Report of the Administrator of Tokelau for the Year Ended 31 March ... (1980/1981-present). Wellington: Government Printer (1906?-1979/1980); Adminstrator of Tokelau (1980/1981-present).
Main secondary sources:
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.) (No direct information on Tokelau, but some information can be inferred from data on New Zealand.)
Monetary authorities: Tokelau
| Dates | Type | Name | Source | Remarks |
| 1926
-present (2005) |
dollarization | New Zealand pound / dollar from 10 July 1967 (issued by various free banks / by central bank Reserve Bank of New Zealand [headquarters Wellington, New Zealand] from 1 August 1934) | starting date inferred from general histories; no specific information on monetary history | A Post Office Savings Bank existed by the 1960s, though I have been unable to find when it began. I date dollarization as beginning in 1926 as an uneducated guess because that was when the territory began using New Zealand currency. Before then, Tokelau used British currency. Tokelau has never had a commercial bank. Tokelau issued its first coins, intended mainly for collectors, in 1978 (New Zealand, Tokelau Coin Regulations 1978, cited in New Zealand, report on Tokelau 1978: 5). |
Exchange rate arrangements: Tokelau
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1877
-1926 |
fixed; used pound sterling | starting date inferred from general histories; no specific information on monetary history | In 1877 the British high commissioner in Fiji received jurisdiction over British nationals in Tokelau, and in 1889 Tokelau became a British protectorate. | |
| 1926
-9 July 1967 |
fixed; used New Zealand pound | starting date inferred from general histories; no specific information on monetary history | Western Samoa currency also circulated and in fact predominated (New Zealand Department of Island Territories annual report 1961: 85). See the table for New Zealand on parallel market data for the New Zealand pound (later dollar). | New Zealand currency became legal tender. No clear distinction existed between British and New Zealand currency until 21 December 1929, when the New Zealand pound began to trade a more than a 2% discount to the pound sterling. New Zealand did not have its own coins until November 1933; before that it used British and Australian coins. Tokelau also used those coins. |
| 10 July 1967
-present (2005) |
fixed; uses New Zealand dollar | New Zealand, Decimal Currency Act, 1964, cited in Reserve Bank of New Zealand annual report, 31 March 1965: 31; Reserve Bank of New Zealand annual report, 31 March 1968: 36 | The decimalized New Zealand dollar replaced the New Zealand pound at New Zealand $2 = New Zealand £1. The transitional period for circulation of old currency alongside new currency ended on 31 May 1968. Western Samoa currency continued to be widely used because of commercial and kinship links to Western Samoa (which since 4 July 1997 renamed itself simply Samoa). |