Where It All Began: Lending of Last Resort and the Bank of England during the Overend, Gurney Panic of 1866
AbstractThe National Monetary Commission was deeply concerned with importing best practice. One important focus was the connection between the money market and international trade. It was said that Britain’s lead in the market for “acceptances” originating in international trade was the basis of its sterling predominance. In this article, we use a so-far unexplored source to document the portfolio of bills that was brought up to the Bank of England for discount and study the behavior of the Bank of England during the crisis of 1866 (the so-called Overend- Gurney panic) when the Bank began adopting lending of last resort policies (Bignon, Flandreau and Ugolini 2011). We compare 1865 (a “normal” year) to 1866. Important findings include: (a) the statistical predominance of foreign bills in the material brought to the Bank of England; (b) the correlation between the geography of bills and British trade patterns; (c) a marked contrast between normal times lending and crisis lending in that main financial intermediaries and the “shadow banking system” only showed up at the Bank’s window during crises; (d) the importance of money market investors (bills brokers) as chief conduit of liquidity provision in crisis; (e) the importance of Bank of England’s supervisory policies in ensuring lending-of-lastresort operations without enhancing moral hazard. An implication of our findings is that Bank of England’s ability to control moral hazard for financial intermediaries involved in acceptances was another reason for the rise of sterling as an international currency.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 04-2011.
Length: 47 pages
Date of creation: 16 Feb 2011
Date of revision:
Other versions of this item:
- Marc Flandreau & Stefano Ugolini, 2011. "Where it all began: lending of last resort and the Bank of England during the Overend-Gurney panic of 1866," Working Paper 2011/03, Norges Bank.
- Flandreau, Marc & Ugolini, Stefano, 2011. "Where It All Began: Lending of Last Resort and the Bank of England during the Overend, Gurney Panic of 1866," CEPR Discussion Papers 8362, C.E.P.R. Discussion Papers.
- Marc Flandreau & Stefano Ugolini, 2011. "Where It All Began: Lending of Last Resort and the Bank of England During the Overend, Gurney Panic of 1866," Working Papers 0007, European Historical Economics Society (EHES).
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-HIS-2011-02-26 (Business, Economic & Financial History)
- NEP-MON-2011-02-26 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barry Eichengreen & Marc Flandreau, 2012.
"The Federal Reserve, the Bank of England, and the Rise of the Dollar as an International Currency, 1914–1939,"
Open Economies Review,
Springer, vol. 23(1), pages 57-87, February.
- Barry Eichengreen, Marc Flandreau, 2010. "The Federal Reserve, the Bank of England, and the Rise of the Dollar as an International Currency, 1914-1939," IHEID Working Papers 16-2010, Economics Section, The Graduate Institute of International Studies.
- Flandreau, Marc, 2004. "The Glitter of Gold: France, Bimetallism, and the Emergence of the International Gold Standard, 1848-1873," OUP Catalogue, Oxford University Press, number 9780199257867.
- Flandreau, Marc & Jobst, Clemens, 2005. "The Ties that Divide. A Network Analysis of the International Monetary System," CEPR Discussion Papers 5129, C.E.P.R. Discussion Papers.
- repec:spo:wpecon:info:hdl:2441/605 is not listed on IDEAS
- Flandreau, Marc & Jobst, Clemens, 2005.
"The Ties that Divide: A Network Analysis of the International Monetary System, 1890 1910,"
The Journal of Economic History,
Cambridge University Press, vol. 65(04), pages 977-1007, December.
- Clemens Jobst & Marc Flandreau, 2005. "The Ties that Divide: A Network Analysis of the International Monetary System, 1890-1910," Sciences Po publications nÂ°5129, Sciences Po.
- Charles Goodhart, 1988. "The Evolution of Central Banks," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570734, December.
- Klovland, Jan Tore & Øksendal, Lars Fredrik, 2013. "The decentralised central bank: regional bank rate autonomy in Norway, 1850-1892," Discussion Paper Series in Economics 6/2013, Department of Economics, Norwegian School of Economics.
- Marc Flandreau & Stefano Ugolini, 2014. "The Crisis of 1866," IHEID Working Papers 10-2014, Economics Section, The Graduate Institute of International Studies.
- Marc Flandreau & Gabriel Geisler Mesevage, 2014. "The Separation of Information and Lending and the Rise of Rating Agencies in the United States," IHEID Working Papers 11-2014, Economics Section, The Graduate Institute of International Studies.
- Prados de la Escosura, Leandro, 2011.
"Human Development in Africa: A Long-run Perspective,"
CEPR Discussion Papers
8586, C.E.P.R. Discussion Papers.
- Prados de la Escosura, Leandro, 2013. "Human development in Africa: A long-run perspective," Explorations in Economic History, Elsevier, vol. 50(2), pages 179-204.
- Leandro Prados de la Escosura, 2011. "Human Development in Africa: A Long-Run Perspective," Working Papers 0008, European Historical Economics Society (EHES).
- Leandro Prados de la Escosura, 2011. "Human development in Africa : a long-run perspective," Working Papers in Economic History wp11-09, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
- Rodríguez Braun, Carlos, 2014. "La banca y las crisis financieras en la literatura popular: Una fortuna peligrosa, de Ken Follett /Banking and Financial Crises in Popular Literature: A Dangerous Fortune, by Ken Follett," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 32, pages 201-222, Enero.
- Giovanni Federico, 2011. "A Tale of Two Oceans: Market Integration Over the High Seas, 1800-1940," Working Papers 0011, European Historical Economics Society (EHES).
- Galo Nuño & Pedro Tedde & Alessio Moro, 2011. "Money dynamics with multiple banks of issue: evidence from Spain 1856-1874," Banco de Espaï¿½a Working Papers 1119, Banco de Espa�a.
- Pierre-Cyrille Hautcoeur & Angelo Riva & Eugene N. White, 2014. "Floating a "Lifeboat": The Banque de France and the Crisis of 1889," NBER Working Papers 20083, National Bureau of Economic Research, Inc.
- Gary B. Gorton, 2012. "Some Reflections on the Recent Financial Crisis," NBER Working Papers 18397, National Bureau of Economic Research, Inc.
- Stephen Quinn & William Roberds, 2012. "Responding to a shadow banking crisis: the lessons of 1763," Working Paper 2012-08, Federal Reserve Bank of Atlanta.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Johannes Eugster).
If references are entirely missing, you can add them using this form.