Bagehot for Beginners: The Making of Lending of Last Resort Operations in the Mid-19th Century

Bignon, Vincent; Flandreau, Marc; Ugolini, Stefano

doi:10.2139/ssrn.1517392

Cited by 27 publications

(34 citation statements)

References 47 publications

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“…In the crises of 1857 and 1866 the Bank of England acted accordingly, and the new doctrine of the lender of last resort was formulated in Bagehot (1873). In France, the evolution in central bankers' attitude followed the very same pattern and timing as in Britain (Bignon et al 2012). Similar changes can be observed on the continent at about the same time.…”

Section: The Substance Of Interaction: Market Vs Bank Interest Ratessupporting

confidence: 67%

“…From the point of view of the central bank such policy might be optimal as a means to filter out less risky counterparties, as was argued for Austria (Lanier 1998). This was also the case in France (Bopp 1952;Bignon et al 2012). In the Netherlands access to the discount and advances facilities was hampered by a combination of high costs and fussiness (Jonker 1996), which might explain why market rates moved above official rates occasionally until the 1850s.…”

Section: The Substance Of Interaction: Market Vs Bank Interest Ratesmentioning

confidence: 97%

“…When demand for discounts increased significantly, however, demand was not satisfied fully. As the Bank did not (or could not) raise the rate it instead imposed quantity restrictions (Bignon et al 2012). In Austria market rates quoted above official rates for extended periods of time while at the same time the standing facilities were used consistently.…”

Section: The Substance Of Interaction: Market Vs Bank Interest Ratesmentioning

confidence: 99%

See 2 more Smart Citations

The Coevolution of Money Markets and Monetary Policy, 1815–2008

Jobst¹,

Ugolini²

2016

Central Banks at a Crossroads

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Trade bills (bill of exchange, 'Handelswechsel') purchased by central banks via discount facilities used to be a traditional and safe (due to the multiple signatures of guarantors) instrument of monetary policy in a number of European jurisdictions into the 1970s and 1980s, discontinued in Germany and Austria only with the onset of EMU in 1999 (when trade bills were included only in the tier two collateral list). The Bank of England had revived bills of exchange at the beginning of the 1980s to achieve its monetary policy objectives, when the supply of Treasury bills had dried up, with a marked impact on the size of the commercial bill market in the UK. Terms of use: Documents inAs a fi nancing instrument for non-fi nancial corporations, over time, trade bills have been largely replaced by keeping the underlying trade receivables on account, amounting to nearly EUR 3 trillion in the euro area, and by the granting of (unsecured) credit lines by banks. Given the impairment in the monetary transmission mechanism, the motivation for the roundtable was to revisit trade bills as a simple, safe and real transactions-based monetary policy instrument and to consider various avenues how the vast pool of trade claims could be mobilized for improving monetary policy transmission, possibly by reactivating trade bills in modern guise, including via schemes that could be based on SEPA infrastructure for direct debit retail payments or via ABS/ABCP based on trade receivables, also with a view to fostering fi nancial integration.Roundtable participants recalled that re-discounting of trade bills by central banks had fallen into disuse, in part for being -inadvertently -associated with the much discredited 'real bills doctrine' and for its use after World War II as an instrument of credit allocation via the setting of multiple discount facility rates below market rates in some jurisdictions. A further reason was the shrinking cost advantage of trade bills as a means of payment or fi nancing, in the face of technological innovations and the rise of repo markets. Participants nonetheless considered that use of instruments like trade bills in monetary policy operations, suitably modernized, could help reduce the liquidity risk premium perceived by businesses, unlock liquidity hoarding by large corporates, liquefy claims on SMEs and thus support working capital and investment.A few selected papers that were presented in the context of the roundtable have subsequently been revi...

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Section: The Substance Of Interaction: Market Vs Bank Interest Ratessupporting

confidence: 67%

Section: The Substance Of Interaction: Market Vs Bank Interest Ratesmentioning

confidence: 97%

Section: The Substance Of Interaction: Market Vs Bank Interest Ratesmentioning

confidence: 99%

See 1 more Smart Citation

The Coevolution of Money Markets and Monetary Policy, 1815–2008

Jobst¹,

Ugolini²

2016

Central Banks at a Crossroads

Self Cite

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“…Regarding the moral hazard inherent in the lender of last resort function, see Rochet and Vives (2004). For an analysis of the historical understanding, see Bordo (1990) or Bignon, Flandreau, and Ugolini (2009).…”

mentioning

confidence: 99%

A Survey of Systemic Risk Analytics

Bisias

Flood²,

et al. 2012

SSRN Journal

324

249

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The Office of Financial Research (OFR) Working Paper Series allows staff and their co-authors to disseminate preliminary research findings in a format intended to generate discussion and critical comments. Papers in the OFR Working Paper Series are works in progress and subject to revision. We provide a survey of 31 quantitative measures of systemic risk in the economics and finance literature, chosen to span key themes and issues in systemic risk measurement and management. We motivate these measures from the supervisory, research, and data perspectives in the main text, and present concise definitions of each risk measure-including required inputs, expected outputs, and data requirements-in an extensive appendix. To encourage experimentation and innovation among as broad an audience as possible, we have developed open-source Matlab code for most of the analytics surveyed, which can be accessed through the Office of Financial Research (OFR) at http://www.treasury.gov/ofr.

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“…Both assumptions, however, are questionable. First, historical research has shown that banks of issue had started to act in the way advocated by Lombard Street well before the book eventually sanctioned such policies (Bignon et al 2011 .…”

Section: 1: the Institutional Approach: What Is A Central Bank?mentioning

confidence: 99%

Bagehot for Beginners: The Making of Lending of Last Resort Operations in the Mid-19th Century

Cited by 27 publications

References 47 publications

The Coevolution of Money Markets and Monetary Policy, 1815–2008

The Coevolution of Money Markets and Monetary Policy, 1815–2008

A Survey of Systemic Risk Analytics

What Do We Really Know About the Long-Term Evolution of Central Banking? Evidence from the Past, Insights for the Present

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