How Fiscal Policy Affects the Price Level: Britain s First Experience with Paper Money

Pamfili Antipa

Working papers from Banque de France

Abstract: Between 1797 and 1821, Britain suspended the gold standard in order to finance the Napoleonic Wars. This measure was accompanied by large scale debt accumulation and inflation: After Napoleon s final defeat at Waterloo in 1815, the debt to GDP ratio had climbed to 226%; the price level exceeded its 1797 level by 22.3%. Under these circumstances and given that institutional settings allowed excluding the possibility of strategic default, I will show that expectations of how debt would be stabilized in the future shaped the observed evolution of the price level. Thus, my contribution establishes the importance of fiscal determinants of the price level.

Keywords: Debt monetization; sovereign debt; inflation; structural breaks. (search for similar items in EconPapers)
JEL-codes: C22 N13 N23 N43 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2014
New Economics Papers: this item is included in nep-his and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:525

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