How Fiscal Policy Affects Prices: Britain's First Experience with Paper Money

• 成果类型: Article
• 署名作者: European Central Bank; Bank of France
• 刊物名称: JOURNAL OF ECONOMIC HISTORY
• ISSN/ISSBN: 0022-0507
• DOI: 10.1017/S0022050716000978
• 发表日期: 2016
• 页码: 1044-1077
• 关键词: gold standard; exchange-rate; british; expectations; EVOLUTION; finance; points; debt; WAR

摘要

For almost 25 years between 1797 and 1821, the gold standard in Britain was suspended in order to finance the Napoleonic Wars, creating a paper pound or a fiat currency. Suspension was accompanied by substantial inflation and the accumulation of public debt. By identifying shifts in the spot exchange rate of paper pounds for gold, I document how contemporaries' expectations of how debt would be stabilized in the future shaped the pound's internal value. Thus, it is argued that during the paper pound period, fiscal prospects provided a third mechanism, beyond monetary and real factors, affecting the price level.