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Bagehot for beginners: The making of lending of last resort operations in the mid-19th century

Author

Listed:
  • Vincent Bignon

    (Graduate Institute, Geneva)

  • Marc Flandreau

    (Graduate Institute, Geneva and CEPR, London)

  • Stefano Ugolini

    (Graduate Institute, Geneva)

Abstract

According to a Keynesian view, short term output fluctuations are normally demand side led. Since prices reflect demand, they should mirror output fluctuations. Thus, prices and output are expected to move in the same direction in the short run. The present paper investigates the historical co-movements of output and prices for a small open raw material based economy, in this case Norway 1830-2006. We find little evidence of a positive relationship. On the contrary, we rather find negative correlations between the two variables, indicating that supply side shocks through the foreign sector were more important for historical business cycles in Norway than assumed hitherto.

Suggested Citation

  • Vincent Bignon & Marc Flandreau & Stefano Ugolini, 2009. "Bagehot for beginners: The making of lending of last resort operations in the mid-19th century," Working Paper 2009/22, Norges Bank.
    • Handle: RePEc:bno:worpap:2009_22
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    References listed on IDEAS

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    More about this item

    Keywords

    Lending of last resort; Bagehot; Bank of England; financial crises; history of monetary policy;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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