Two Views of the Lender of Last Resort: Thornton and Bagehot

David Laidler

No 20029, University of Western Ontario, Departmental Research Report Series from University of Western Ontario, Department of Economics

Abstract: Henry Thornton and Walter Bagehot were both advocates of discretionary monetary policy, especially as regards the Bank of England's role as a lender of last resort, but they differed on many details of the case. Where Bagehot thought that the Bank's central position in the financial system was purely the product of a specific monopoly privileges, Thornton also saw it as the desirable and natural outcome of the operations of banking; where Bagehot located the productivity of banking in credit markets, Thornton stressed the importance of liability side of the system's balance sheet; and where Bagehot took the desirability of gold convertibility for granted, Thornton was willing to trade off this goal against the maintenance of monetary stability.

Date: 2002-09
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Journal Article: TWO VIEWS OF THE LENDER OF LAST RESORT: THORNTON AND BAGEHOT (2003)
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