IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this book chapter

The Gold Standard and the Bank of England in the Crisis of 1847

In: A Retrospective on the Classical Gold Standard, 1821-1931

Listed author(s):
  • Rudiger Dornbusch
  • Jacob A. Frenkel

This paper examines the operation of the gold standard and the performance of the Bank of England during the crisis of 1847. The key feature of that crisis has been its origin: it originated from a massive real shock rather than from monetary disorder. A harvest failure gave rise to commercial distress and financial panic.Following a brief outline of the main events during the 1847 crisis, we present asimple model of the financial sector that captures the central characteristics of the crisis. The model, which highlights the role of confidence in both external and internal convertibility, is then used for interpreting the detailed characteristics of the financial crisis.Faced with a confidence crisis leading to international and external monetary drains,the Bank of England suspended Peel's act and thereby was allowed to issue fiat money without being constrained to have full gold backing. Our analysis shows that suspension of Peel's act was the proper policy required for the restoration of confidence. It also sheds light on the role of a lender of last resort in cases of banking panic.As for the evaluation of the gold standard, the 1847 crisis demonstrates that International capital flows have played a key role in the adjustnent mechanism. Further, it demonstrates that in contrast with the traditional representation, the gold standard has not been characterized by automatic, non-discretionary adjustment. On the contrary,banking policies and changes in the reserve-deposits and currency-deposits ratios have affected the money stock independently of gold flows.
(This abstract was borrowed from another version of this item.)

If 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.

File URL:
Download Restriction: no

in new window

This chapter was published in:
  • Michael D. Bordo & Anna J. Schwartz, 1984. "A Retrospective on the Classical Gold Standard, 1821-1931," NBER Books, National Bureau of Economic Research, Inc, number bord84-1, December.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11130.
    Handle: RePEc:nbr:nberch:11130
    Contact details of provider: Postal:
    National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

    Phone: 617-868-3900
    Web page:

    More information through EDIRC

    References listed on IDEAS
    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.:

    in new window

    1. Hicks, John, 1977. "Economic Perspectives: Further Essays on Money and Growth," OUP Catalogue, Oxford University Press, number 9780198284079.
    2. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, December.
    3. Tooke, Thomas, 1844. "An Inquiry into the Currency Principle," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number tooke1844, November.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:11130. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.