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Narrow Banking, Real Estate, and Financial Stability in the UK, c.1870-2010

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  • Avner Offer

Abstract

Banking in the UK was stable for more than a century after 1866. Financial institutions were differentiated according to function. The core banks did not engage in maturity transformation, but in managing a payments system for business. Real estate was a potential source of instability due to high credit elasticity of demand and to long maturities, but credit was successfully rationed by building societies, who relied on the funds that their savers had actually withdrawn from consumption. After 1945, credit rationing came under pressure from consumers and housebuyers. Incremental liberalisations after 1971 released a tide of credit which created a property windfall economy. Borrowers and lenders both prospered until the system collapsed under its own weight in 2007.

Suggested Citation

  • Avner Offer, 2013. "Narrow Banking, Real Estate, and Financial Stability in the UK, c.1870-2010," Oxford Economic and Social History Working Papers _116, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:esohwp:_116
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    References listed on IDEAS

    as
    1. Avner Offer, 2012. "The Economy of Obligation: Incomplete Contracts and the Cost of the Welfare State," Oxford Economic and Social History Working Papers _103, University of Oxford, Department of Economics.
    2. Mr. Burkhard Drees & Ceyla Pazarbasioglu, 1995. "The Nordic Banking Crises: Pitfalls in Financial Liberalization?," IMF Working Papers 1995/061, International Monetary Fund.
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    6. Aled Davies, 2012. "The Evolution of British Monetarism: 1968-1979," Oxford University Economic and Social History Series _104, Economics Group, Nuffield College, University of Oxford.
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    10. Schneider, Eric B., 2013. "Real wages and the family: Adjusting real wages to changing demography in pre-modern England," Explorations in Economic History, Elsevier, vol. 50(1), pages 99-115.
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