How Fiscal Policy Affects Prices: Britain's First Experience with Paper Money

Pamfili Antipa

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Abstract: For almost 25 years between 1797 and 1821, the gold standard in Britain was suspended in order to finance the Napoleonic Wars, creating a paper pound or a fiat currency. Suspension was accompanied by substantial inflation and the accumulation of public debt. By identifying shifts in the spot exchange rate of paper pounds for gold, I document how contemporaries' expectations of how debt would be stabilized in the future shaped the pound's internal value. Thus, it is argued that during the "paper pound" period, fiscal prospects provided a third mechanism, beyond monetary and real factors, affecting the price level.

Keywords: Fiscal; policy (search for similar items in EconPapers)
Date: 2016-12
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Citations: View citations in EconPapers (5)

Published in The Journal of Economic History, 2016, 76 (4), pp.1044-1077. ⟨10.1017/S0022050716000978⟩

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Journal Article: How Fiscal Policy Affects Prices: Britain's First Experience with Paper Money (2016)
Working Paper: How Fiscal Policy Affects Prices: Britain's First Experience with Paper Money (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01510323

DOI: 10.1017/S0022050716000978

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