The Monetary Foundations of Britain’s Economy in the Early 19th Century

Abstract

This paper studies the development of the practice of central banking in the early 19th century by engaging in a detailed analysis of the Bank of England’s changing policies with respect to its discounts and lending to the private sector. To set the scene, the practices that characterized the banks and money market of the era are described, establishing a close connection between the bill market and the banking system. This paper, then, finds that in the early years of the Restriction the operations of the Bank were completely transformed, and goes on to demonstrate that the Bullionist Controversy and the 1810 crisis led the Bank both to acknowledge privately its duties to the public, and also to restructure its discount policies with a view to promoting financial and monetary stability.