Nathan Sussman
The Bank of England co-organised a ‘History and Policy Making Conference‘ in late 2020. This guest post by Nathan Sussman, Professor of International Economics at the Graduate Institute of Geneva, is based on material included in his conference presentation.
Continue reading “Challenges to monetary policy: lessons from Medieval Europe”Max Harris
This post contributes to our occasional series of guest posts by external researchers who have used the Bank of England’s archives for their work on subjects outside traditional central banking topics.
When Britain created the Exchange Equalisation Account (EEA) in 1932, its designers had little sense of the controversy that would ensue. The previous year, Britain had suspended gold convertibility, and the volatile capital flows that followed convinced officials that they needed a tool for managing the exchange rate. The EEA – originally a fund solely for foreign exchange interventions (its remit is broader now) – seemed not only necessary but eminently reasonable. To a world in the throes of depression, however, it looked like a means to weaken sterling and reap a competitive advantage. America responded by establishing the Exchange Stabilization Fund (ESF) in what many viewed as another escalation in the conflict that was tearing the international monetary system apart.
Continue reading “Battle of the exchange funds”Barry Eichengreen
The Bank of England co-organised a ‘History and Policy Making Conference‘ in late 2020. This guest post by Barry Eichengreen, Professor of Economics and Political Science at the University of California Berkley, is based on material included in his keynote address at the conference.
Learning from history is hard. At central banks, it can be hard to draw policymakers’ attention to historical evidence. Even when historical analogies are at the forefront of their minds, the right analogies are not always applied in the right way. In fact, over-reliance on a small number of compelling historical case studies can lead to suboptimal decisions. Policymakers therefore need access to a wide portfolio of analogies. They must also cultivate an historical sensibility that is suspicious of simplification and alert to the differences – as well as the similarities – between ‘now’ and ‘then’.
Continue reading “Central banks and history: a troubled relationship”Catherine R. Schenk
The Bank of England co-organised a ‘History and Policy Making Conference‘ in late 2020. This guest post by Catherine Schenk, Professor of Economic and Social History at the University of Oxford, is based on material included in her conference presentation.
Since the Great Financial Crisis started in 2007 there has been renewed interest in using the past as a basis for policy responses in the present, but how useful is history and how is it best used? Certainly, the old chestnut that ‘those who neglect the past are sure to repeat it’ is a valid warning, but how to select the appropriate historical examples and draw the right lessons is a more nuanced exercise that is explored in this post.
Continue reading “When should policymakers reach for the history books? Some examples from the 20th century”Austen Saunders
1 March 2021 was the 75th anniversary of the Bank of England’s nationalisation. While its stock formerly passed into public ownership in 1946, Lord Catto (the Governor) and Hugh Dalton (the Chancellor of the Exchequer) had negotiated the terms of the Bank’s nationalisation the summer before. During these negotiations Catto lobbied for the Bank not to be given more powers to regulate banks. Why? The answer hinges on how the Bank understood its role. And it helps explain why, as David Kynaston sees it, the Bank and the government ‘missed a historic opportunity’ to comprehensively redefine the Bank’s responsibilities.
Continue reading “Negotiating nationalisation”Norma Cohen
This post contributes to our occasional series of guest posts by external researchers who have used the Bank of England’s archives for their work on subjects outside traditional central banking topics.
In August 1914, Britain was the world’s wealthiest country. Yet there was no guarantee that government would be able to harness that wealth for World War I. Effectively, Britain was forced into a ‘Battle for Capital’ simultaneous with its military efforts — with the efficacy of the latter dependent on the success of the former. Over 80% of the £7,280 million Britain borrowed from 1914 to 1919, was raised at home. New research shows that Britain’s desperate efforts to marshal its citizens’ capital for the purpose of war, while also struggling to direct wartime production, profits and labour, led to a sharp shift in the sources of its borrowings during the war and in the years after.
Continue reading “How Britain paid for war: bond holders in the Great War 1914-32”Chris Swinson
This post contributes to our occasional series of guest posts by external researchers who have used the Bank of England’s archives for their work on subjects outside traditional central banking topics.
In 1944, the Bank of England’s historian, John Clapham, looked back at the ways in which the Bank had changed since 1914 and remarked:
‘ . . . it would not be fantastic to argue that the Bank in 1944 was further . . . from 1914 than 1914 was from 1714.’
Continue reading “Montagu Norman and the transformation of the Bank”Galina Potjagailo and Maik H. Wolters
Global financial cycles: a long-term affair
Today’s financial system is global: credit and several financial asset classes show booms and busts across countries, sometimes with severe repercussions to the global economy. Yet it is debated to what extent common dynamics rather than domestic cycles lie behind financial fluctuations and whether the impact of global drivers is growing. In a recent Staff Working Paper, we observe various global financial cycles going as far back as the 19th century. We find that a volatile global equity price cycle is nowadays the main driver of stock prices across advanced economies. Global cycles in credit and house prices have become larger and longer over the last 30 years, having gained relevance in economies that are more financially open and developed.
Continue reading “Global financial cycles since 1880”Austen Saunders
Central banks want to learn from history. They can do so by drawing on decades of work by economic historians, as well as their own archives which manifest layers of institutional memory. But the path from page to policy can be difficult to find. Central banks need therefore to invest in the capacity of their own staff to think historically. This will help them use evidence from the past to make better decisions in the future. In practice, this means producing historical research as well as consuming it. Institutions like central banks need to be fluent participants in the conversations which bridge the distance between past and present.
Continue reading “Thinking historically”Paul Schmelzing
Paul Schmelzing is an academic visitor to the Bank of England, currently based at Yale University. In this guest post, he summarises his research on the differential between real interest rates and real growth rates over the past seven centuries…
There is a lively academic and policy debate about whether a build-up of excess savings in advanced economies has created a drag on long-term interest rates. In a recent paper, I provide new context to these discussions. I construct a long-run advanced economy (DM) public real interest rate series geographically covering 78% of DM GDP since the 14th century. Using this series, I argue that current interest rate trends cannot be rationalized in a “secular stagnation” framework that has been “manifest for two decades”. Rather, historical data illustrates that advanced economy real rates have steadily declined for more than five centuries, despite important reversal periods. This post draws from long-run economic history to provide additional insights concerning the current interest rate environment.
Continue reading “Global real rates, 1311–2018”