If dollar purchases by the central bank were not routinely sterilized, the money supply might increase more than desired, possibly leading to an overheating of the economy and inflation. To date the PBOC has been largely successful in its sterilization operations, but if it continues to use this strategy it will eventually encounter problems.
States had allowed for massive inflation given the need to finance the war, but then reintroduced gold parities partly at pre-war rates. This led to substantial misalignment of exchange rates. In addition, the process of democratisation made it increasingly difficult for the authorities to subordinate domestic policies to the stability of the exchange rate.