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Danger to the old lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821

Author

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  • Nuno Palma

    (University of Groningen)

  • Patrick O’Brien

    (London School of Economics)

Abstract

"The Bank Restriction Act of 1797 suspended the convertibility of the Bank of England's notes into gold. The current historical consensus is that the suspension was a result of the state's need to finance the war, France’s remonetization, a loss of confidence in the English country banks, and a run on the Bank of England’s reserves following a landing of French troops in Wales. We argue that while these factors help us understand the timing of the Restriction period, they cannot explain its success. We deploy new long-term data which leads us to a complementary explanation: the policy succeeded thanks to the reputation of the Bank of England, achieved through a century of prudential collaboration between the Bank and the Treasury."

Suggested Citation

  • Nuno Palma & Patrick O’Brien, 2017. "Danger to the old lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821," Working Papers 17001, Economic History Society.
    • Handle: RePEc:ehs:wpaper:17001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Leticia Arroyo Abad & Nuno Palma, 2020. "The Fruits of El Dorado: The Global Impact of American Precious Metals," Economics Discussion Paper Series 2003, Economics, The University of Manchester, revised May 2021.
    2. Nuno Palma, 2018. "Reconstruction of money supply over the long run: the case of England, 1270–1870," Economic History Review, Economic History Society, vol. 71(2), pages 373-392, May.
    3. Philip Garnett & Simon Mollan & R. Alexander Bentley, 2017. "Banks, births, and tipping points in the historical demography of British banking: A response to J.J. Bissell," Business History, Taylor & Francis Journals, vol. 59(5), pages 814-820, July.
    4. repec:osf:socarx:apbkm_v1 is not listed on IDEAS
    5. Hanhui Guan & Nuno Palma & Meng Wu, 2024. "The rise and fall of paper money in Yuan China, 1260–1368," Economic History Review, Economic History Society, vol. 77(4), pages 1222-1250, November.
    6. Patrick K. O'Brien & Nuno Palma, 2023. "Not an ordinary bank but a great engine of state: The Bank of England and the British economy, 1694–1844," Economic History Review, Economic History Society, vol. 76(1), pages 305-329, February.
    7. Nuno Palma & Carolyn Sissoko, 2022. "Crowding in During the Seven Years' War," Economics Discussion Paper Series 2211, Economics, The University of Manchester, revised Jun 2024.
    8. Berdell, John & Menudo, José M., 2024. "Where Is Credit In The Price Specie Flow?," SocArXiv apbkm, Center for Open Science.
    9. Mike Anson & David Bholat & Miao Kang & Ryland Thomas, 2017. "The Bank of England as Lender of Last Resort: New historical evidence from daily transactional data," Working Papers 0117, European Historical Economics Society (EHES).
    10. repec:ehl:wpaper:90190 is not listed on IDEAS
    11. Patricia Gomez-Gonzalez & Gabriel Mathy, 2024. "The World's First Global Safe Asset: British Public Debt, 1718-1913," Fordham Economics Discussion Paper Series dp2024-01er:dp2024-01, Fordham University, Department of Economics.
    12. Nuno Palma & André C. Silva, 2024. "Spending A Windfall," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 283-313, February.
    13. Irigoin, Alejandra, 2018. "Global silver: Bullion or Specie? Supply and demand in the making of the early modern global economy," MPRA Paper 88859, University Library of Munich, Germany.
    14. Nuno Palma, 2019. "The Real Effects of Monetary Expansions: Evidence from a Large-Scale Historical Natural Experiment," Economics Discussion Paper Series 1904, Economics, The University of Manchester, revised Aug 2021.
    15. Carolyn Sissoko, 2022. "Becoming a central bank: The development of the Bank of England's private sector lending policies during the Restriction," Economic History Review, Economic History Society, vol. 75(2), pages 601-632, May.

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    More about this item

    Keywords

    Bank of England; financial revolution; fiat money; money supply; monetary policy commitment; reputation; and time-consistency; regime shift; financial sector growth;
    All these keywords.

    JEL classification:

    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N43 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: Pre-1913

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