Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the Regime Shift to Paper Money, 1797-1821

Patrick K. O’Brien and Nuno Palma

No 67, Working Papers from Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research

Abstract: The Bank Restriction Act of 1797 made legal the Bank of England’s suspension of the convertibility of its banknotes. The current historical consensus is that it was a result of the state's need to finance the war, France’s remonetisation, a loss of confidence in the English country banks, and a run on the Bank of England’s reserves. We argue that while these factors help us understand the timing of the Restriction period, they cannot explain its success. We deploy new long-term data which leads us to a complementary explanation: the policy succeeded thanks to the reputation of the Bank of England, achieved through a century of monetary stability.

Keywords: Bank of England; financial revolution; fiat money; money supply; monetary policy commitment; reputation; and time-consistency; regime shift; financial sector growth (search for similar items in EconPapers)
JEL-codes: N13 N23 N43 (search for similar items in EconPapers)
Date: 2016-07, Revised 2016-10
New Economics Papers: this item is included in nep-cba and nep-cse
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://cgr.sbm.qmul.ac.uk/CGRWP67.pdf

Related works:
Journal Article: Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797–1821 (2020)
Working Paper: Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the Regime Shift to Paper Money, 1797-1821 (2018)
Working Paper: Danger to the old lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821 (2017)
Working Paper: Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821 (2016)
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