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SUMMARY:’Midas\, transmuting all\, into paper’: the Bank of England an
 d the Banque de France during the Napoleonic Wars - Dr Elisa Newby\, Bank 
 of Finland
DTSTART:20110523T160000Z
DTEND:20110523T180000Z
UID:TALK30402@talks.cam.ac.uk
CONTACT:D'Maris Coffman
DESCRIPTION:This paper re-assesses Revolutionary and Napoleonic wartime ec
 onomic policy in \nlight of recent development in monetary theory and re-e
 merging interest in balance \nsheets. We explain exactly how and why the B
 ank of England was able to adopt a \nset of flexible and accommodative pol
 icies and why the Banque de France was not. \nWe interpret the actions of 
 the central banks through stylized models on (i) optimal \ngold reserve ho
 ldings\; (ii) asset liability management\; and (iii) the publicís ináati
 on \nexpectations formation. The key contribution of our analysis is that 
 the government \nand the Bank of England combined economically\, political
 ly and legally (with Acts of \nParliament\, Committees of investigation an
 d ináuence on public opinion all employed) \nto ensure the ongoing solven
 cy of the Bank of England\, which allowed the Bank to \ncontinue to make s
 ubstantial profits throughout the Napoleonic Wars\, and as this was \na cr
 edible arrangement it allowed merchants to continue to trade with non-conv
 ertible \nBank of England notes and the government to finance the war effo
 rt with significant \nrecourse to unfunded debt. We find that the Order of
  the Council's decision to suspend \ngold payments temporarily a§orded pr
 otection to the government and its central bank \nin the conflicting goals
  of price stability and war finance. By contrast\, as the French \nmonetar
 y system had lost its reputation in the 18th century\, Napoleonic finance 
 had to \nevolve within a rigid and limiting framework. \n
LOCATION:Lucia Windsor Room\, Newnham College
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