Bagehot For Beginners: The Making Of Lending Of Last Resort Operations In The Mid-19th Century

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Executive Summary

In this paper, the authors survey the development of lending of last resort operations in the mid-19th century. They identify and document critical dimensions of the extension of lending of last resort functions, and also develop original empirical tests enabling them to identify such things as the emergence of "Free lending" during financial crisis. The focus is predominantly on the Bank of England, but they also survey some counterpart evidence for the Bank of France. The main finding, which extends earlier work (Collins 1992), is that free lending and extensive liquidity support against good collateral developed gradually after 1847 and was already a fact of life before Bagehot published Lombard Street.

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