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Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821

O'brien, Patrick K. and Palma, Nuno (2020) Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821. European Review of Economic History, 24 (2). 390 - 426. ISSN 1361-4916

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Identification Number: 10.1093/ereh/hez008

Abstract

The Bank Restriction Act of 1797 was the unconventional monetary policy of its time. It suspended the convertibility of the Bank of England's notes into gold, a policy that lasted until 1821. The current historical consensus is that it was a result of the state's need to finance the war, France's remonetization, a loss of confidence in the English country banks, and a run on the Bank of England's reserves following a landing of French troops in Wales. We argue that while these factors help us understand the timing of the suspension, they cannot explain its success. We deploy new long-term data that leads us to a complementary explanation: The policy succeeded thanks to the reputation of the Bank of England, achieved through a century of prudential collaboration between the Bank and the Treasury.

Item Type: Article
Additional Information: © 2019 The Author(s)
Divisions: Economic History
Economics
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: N - Economic History > N2 - Financial Markets and Institutions > N20 - General, International, or Comparative
Date Deposited: 25 Aug 2022 10:09
Last Modified: 02 Sep 2022 08:51
URI: http://eprints.lse.ac.uk/id/eprint/116388

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