Frosted glass or raised eyebrow? Testing the Bank of England’s discount window policies during the crisis of 1847

Kilian Rieder, Michael Anson, David Bholat, Miao Kang and Ryland Thomas
Additional contact information
Michael Anson: Bank of England
Miao Kang: Bank of England

No 18020, Working Papers from Economic History Society

Abstract: "It is well-known that quantitative credit restrictions, rather than Bagehot-style “free lending” con- stituted the standard response to financial crises in the early days of central banking. But why did central banks in the past frequently restrict the supply of loans during financial crises? In this paper, we draw on a large novel, hand-collected loan-level data set to study the Bank of England’s policy response to the crisis of 1847. We find that credit rationing due to residual imperfect informa- tion `a la Stiglitz and Weiss (1981) alone cannot be a convincing explanation for quantitative credit restrictions during the crisis of 1847. We provide preliminary evidence which could suggest that discriminatory credit rationing on the basis of loan applicants’ type and identity characterized the BoE’s response to the crisis of 1847. Our results also show that “collateral” characteristics played an important role in the BoE’s loan decisions, even after one controls for the identity of loan applicants. This finding confirms the hypothesis in Capie (2002) and Flandreau and Ugolini (2011, 2013, 2014) that the characteristics of bills of exchange submitted to the discount window mattered. Since our results suggest that the Bank also took decisions on the basis of the identity of loan applicants, our preliminary findings would seem to challenge Capie’s “frosted glass” metaphor, but more work is required to confirm these conjectures."

JEL-codes: E44 E52 E58 G01 G21 N10 N13 N20 N23 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ehs.org.uk/dotAsset/dabf62df-ef2d-4cec-87f7-42e8e420e1c7.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ehs.org.uk/dotAsset/dabf62df-ef2d-4cec-87f7-42e8e420e1c7.pdf [301 Moved Permanently]--> https://ehs.org.uk/dotAsset/dabf62df-ef2d-4cec-87f7-42e8e420e1c7.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehs:wpaper:18020

Access Statistics for this paper

More papers in Working Papers from Economic History Society Contact information at EDIRC.
Bibliographic data for series maintained by Chair Public Engagement Committe (currently David Higgins - Newcastle) ().