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Midas, transmuting all, into paper: The Bank of England and the Banque de France during the Revolutionary and Napoleonic Wars

  • Chadha , Jagjit S.


    (Keynes College, University of Kent, Canterbury)

  • Newby, Elisa


    (Bank of Finland, Monetary Policy and Research Department)

This paper assesses Revolutionary and Napoleonic wartime economic policy. Suspension of gold convertibility in 1797 allowed the Bank of England to nurture British monetary orthodoxy. The Order of the Privy Council suspended gold payments on Bank of England notes and afforded simultaneous protection to the government and the Bank in pursuit of the conflicting goals of price stability and war finance. The government, the Bank of England and the commercial banks formed a loose alliance drawing on due political and legal processes and also paid close attention to public opinion. We suggest that the ongoing solvency of the Bank of England was facilitated by suspension and allowed the Bank to continue to make substantial profits throughout the Wars. It became acceptable for merchants to continue to trade with non-convertible Bank of England notes and for the government to finance the war effort, even with significant recourse to unfunded debt. These aspects combined to create a suspension of convertibility that did not undermine the currency. By contrast, the Assignats debacle had cost the French monetary system its reputation in the last decade of the 18th century and so Napoleonic .finance had to evolve within a more rigid and limiting framework.

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Paper provided by Bank of Finland in its series Research Discussion Papers with number 20/2013.

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Length: 54 pages
Date of creation: 16 Sep 2013
Date of revision:
Handle: RePEc:hhs:bofrdp:2013_020
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
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  1. Bordo Michael D. & Kydland Finn E., 1995. "The Gold Standard As a Rule: An Essay in Exploration," Explorations in Economic History, Elsevier, vol. 32(4), pages 423-464, October.
  2. Bordo, Michael D. & White, Eugene N., 1991. "A Tale of Two Currencies: British and French Finance During the Napoleonic Wars," The Journal of Economic History, Cambridge University Press, vol. 51(02), pages 303-316, June.
  3. Sargent, Thomas J & Velde, Francois R, 1995. "Macroeconomic Features of the French Revolution," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 474-518, June.
  4. Bordo, Michael D & Redish, Angela, 1993. "Maximizing Seignorage Revenue during Temporary Suspensions of Convertibility: A Note," Oxford Economic Papers, Oxford University Press, vol. 45(1), pages 157-68, January.
  5. Jagjit S. Chadha & Luisa Corrado, 2011. "Macro-prudential Policy on Liquidity: What does a DSGE Model tell us?," Studies in Economics 1108, School of Economics, University of Kent.
  6. Perlman, Morris, 1986. "The Bullionist Controversy Revisited," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 745-62, August.
  7. G. J. Santoni, 1984. "A private central bank: some olde English lessons," Review, Federal Reserve Bank of St. Louis, issue Apr, pages 12-22.
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