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On the response to the financial crisis of 1914: The Bank of England's discount policy

Author

Listed:
  • Agostino, Mariarosaria
  • Errico, Lucia
  • Rondinella, Sandro
  • Trivieri, Francesco

Abstract

This work investigates the Bank of England's policy response to the London Financial Crisis of 1914, triggered by the outbreak of the Great War. By using daily data on discount operations drawn from the Bank of England's historical archive, we empirically test whether the Central Bank played the role of lender of last resort or it restricted credit. Our results suggest that, during 1914, the Bank of England did not change its policy in terms of bills’ discounting. Even though the discounter identity might have been a determinant of Bank's lending decisions (as in Flandreau and Ugolini, 2011 and 2013; Anson et al., 2019a), our evidence suggests that, throughout 1914, the Bank of England operated as a lender of last resort according to the Bagehot rules.

Suggested Citation

  • Agostino, Mariarosaria & Errico, Lucia & Rondinella, Sandro & Trivieri, Francesco, 2022. "On the response to the financial crisis of 1914: The Bank of England's discount policy," Research in Economics, Elsevier, vol. 76(4), pages 290-307.
    • Handle: RePEc:eee:reecon:v:76:y:2022:i:4:p:290-307
    DOI: 10.1016/j.rie.2022.09.001
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    More about this item

    Keywords

    Financial crisis; Bank of England; Great war; Bagehot rules;
    All these keywords.

    JEL classification:

    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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