Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/210099 
Year of Publication: 
2016
Series/Report no.: 
Working Paper No. 10/2016
Publisher: 
Norges Bank, Oslo
Abstract: 
Is a strong commitment to monetary stability enough to ensure credibility? The recent literature suggests it might not be if the central bank cannot perform pure interest rate policy and has to resort to balance sheet policy: the central bank's financial strength (i.e. the long-term sustainability of its policy) is also a determinant of credibility. This paper provides historical evidence on the issue by focusing on the case of the Bank of England at the heyday of the classical gold standard. It shows that as the Bank was not perceived as having the means to fulfil all of its obligations, the efficacy of its interest rate policy was poor. Failing to reform for political economy reasons, the Bank eventually had to default on its formal convertibility mandate.
Subjects: 
central banking
institutional design
monetary policy implementation
reverse repos
term structure of interest rates
gold standard
JEL: 
E42
E43
E58
N13
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-927-2
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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