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Bagehot for Central Bankers

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  • Laurent Le Maux

    (University of Western Brittany)

Abstract

Walter Bagehot (1873) published his famous book, Lombard Street, almost 150 years ago. The adage 'lending freely against good collateral at a penalty rate' is associated with his name and his book has always been set on a pedestal and is still considered as the leading reference on the role of lender of last resort. Nonetheless, without a clear understanding of the theoretical grounds and the institutional features of the British banking system, any interpretation of Bagehot's writings remains vague if not misleading, which is worrisome if they are supposed to provide a guideline for policy makers. The purpose of the present paper is to determine whether Bagehot's recommendation remains relevant for modern central bankers or whether it was indigenous to the monetary and banking architecture of Victorian times.

Suggested Citation

  • Laurent Le Maux, 2021. "Bagehot for Central Bankers," Working Papers Series inetwp147, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:inetwp147
    DOI: 10.36687/inetwp147
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    More about this item

    Keywords

    Central Banking; Lender of Last Resort;

    JEL classification:

    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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