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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

Listed author(s):
  • Patrick K. O’Brien

    (London School of Economics)

  • Nuno Palma

    (European University Institute
    University of Groningen)

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.

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File URL: http://www.ehes.org/EHES_100.pdf
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Paper provided by European Historical Economics Society (EHES) in its series Working Papers with number 0100.

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Length: 48 pages
Date of creation: Jul 2016
Handle: RePEc:hes:wpaper:0100
Contact details of provider: Web page: http://www.ehes.org

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  1. Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 381-399.
  2. Neal, Larry, 2000. "How it all began: the monetary and financial architecture of Europe during the first global capital markets, 1648 1815," Financial History Review, Cambridge University Press, vol. 7(02), pages 117-140, October.
  3. L. D. Schwarz, 1985. "The Standard of Living in the Long Run: London, 1700–1860," Economic History Review, Economic History Society, vol. 38(1), pages 24-36, 02.
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