Macroeconomic Implications of Gold Reserve Policy of the Bank of England during the Eighteenth Century
By imposing a simple adjustment cost on gold purchases the Bank of England was able to manage external drains of monetary gold while maintaining the convertibility of pound during the eighteenth century. This was a period during which constant political disturbances and external shocks on the market price of gold made monetary policy a challenging task. The implications of adjustment cost were not just limited to the gold reserves of the Bank, but stabilised consumption and the price level.
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