Working Paper: CEPR ID: DP15400
Authors: Patrick O'Brien; Nuno Palma
Abstract: From its foundation as a private corporation in 1694 the Bank of England extended large amounts of credit to support the British private economy and to support an increasingly centralized British state. The Bank helped the British state reach a position of geopolitical and economic hegemony in the international economic order. In this paper we deploy recalibrated financial data to analyse an evolving trajectory of connexions between the British economy, the state, and the Bank of England. We show how these connections contributed to form an effective and efficient fiscal-naval state and promoted the development of a system of financial intermediation for the economy. This symbiotic relationship became stronger after 1793. The evidence that we consider here shows that although the Bank was nominally a private institution and profits were paid to its shareholders, it was playing a public role well before Bagehot’s doctrine
Keywords: Bank of England; Statebuilding; Institutions; National Defence
JEL Codes: H41; N13; N23; N43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bank of England as debt manager (H63) | Increased state capacity (H19) |
| Bank of England providing short-term finance (G21) | Supported private economy (P31) |
| Bank's role in increasing money supply (E51) | Benefited state tax collection (H71) |
| Bank's role in increasing money supply (E51) | Benefited private economy (P19) |