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Lender of Last Resort in a Peripheral Economy with a Fixed Exchange Rate: Financial Crises and Monetary Policy in Sweden under the Silver and Gold Standards, 1834 – 1913

Listed author(s):
  • Ögren, Anders


    (Institute for Research in Economic History)

According to the classical view, an economy’s lender of last resort should be its central bank. For brief periods of time, the bank might suspend convertibility in order to provide the liquidity needed to support the domestic credit market. Recent experience of financial crises demonstrates the conflict between maintaining a fixed exchange rate and serving as a lender of last resort. The lesson of Sweden’s history of crises under the classical specie standard is that a transitional, capital importing economy has to pay closer attention to the specie standard rules than do capital exporting economies. While the Swedish central bank, for a limited time, could support the credit market within the limits of the specie standard, if the crises persisted support mechanisms other than abandoning convertibility were required. The solution adopted was to import high powered money through loans guaranteed by the Swedish State.

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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 537.

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Length: 35 pages
Date of creation: 02 Oct 2003
Date of revision: 15 Oct 2003
Handle: RePEc:hhs:hastef:0537
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