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Responding to a shadow banking crisis: the lessons of 1763

  • Stephen Quinn
  • William Roberds

In August 1763, northern Europe experienced a financial crisis with numerous parallels to the 2008 Lehman Brothers episode. The 1763 crisis was sparked by the failure of a major provider of acceptance loans, a form of securitized credit resembling modern asset-backed commercial paper. The central bank at the hub of the crisis, the Bank of Amsterdam, responded by broadening the range of acceptable collateral for its repo transactions. Analysis of archival data shows that this emergency source of liquidity helped to contain the effects of the crisis, by preventing the collapse of at least two other major securitizers. While the underlying themes seem to have changed little in 250 years, the modest scope of the 1763 liquidity intervention, together with the lightly regulated nature of the eighteenth century financial landscape, provide some informative contrasts with events of late 2008.

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Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2012-08.

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Date of creation: 2012
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Handle: RePEc:fip:fedawp:2012-08
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  1. Stephen Quinn & William Roberds, 2010. "How Amsterdam got fiat money," Working Paper 2010-17, Federal Reserve Bank of Atlanta.
  2. Linda S. Goldberg & Craig Kennedy & Jason Miu, 2010. "Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs," NBER Working Papers 15763, National Bureau of Economic Research, Inc.
  3. Nogues-Marco, Pilar, 2013. "Competing Bimetallic Ratios: Amsterdam, London, and Bullion Arbitrage in Mid-Eighteenth Century," The Journal of Economic History, Cambridge University Press, vol. 73(02), pages 445-476, June.
  4. Isabel Schnabel & Hyun Song Shin, 2004. "Liquidity and Contagion: The Crisis of 1763," Journal of the European Economic Association, MIT Press, vol. 2(6), pages 929-968, December.
  5. Michael J. Fleming & Warren B. Hrung & Frank M. Keane, 2010. "Repo market effects of the Term Securities Lending Facility," Staff Reports 426, Federal Reserve Bank of New York.
  6. 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).
  7. Morten L. Bech & Bart Hobijn, 2007. "Technology Diffusion within Central Banking: The Case of Real-Time Gross Settlement," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 147-181, September.
  8. repec:cup:cbooks:9780521578257 is not listed on IDEAS
  9. Paolo Emilio Mistrulli, 2007. "Assessing financial contagion in the interbank market: Maximum entropy versus observed interbank lending patterns," Temi di discussione (Economic working papers) 641, Bank of Italy, Economic Research and International Relations Area.
  10. Ferderer, J. Peter, 2003. "Institutional Innovation and the Creation of Liquid Financial Markets: The Case of Bankers' Acceptances, 1914 1934," The Journal of Economic History, Cambridge University Press, vol. 63(03), pages 666-694, September.
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