The Changing Face of the Bank of England

Paper Summary:

This paper discusses central bank independence and the effects on the U.K. economy of Labour's decision to grant the Bank of England independence in 1997. It analyses inflationary and interest rate data from the years preceding and following Labour's election and cites evidence suggesting that it is inappropriate to ascribe all of the credit for recent low interest rates and inflation solely to the government's decision to make the bank independent.

Outline
Introduction
Birth of the Bank
A Growing Remit
The Independent Bank
The Rationales For and Against Independence
The Effects of Central Bank Independence on the British Economy
Conclusion

From the Paper:

"The Bank of England was established in 1694 as the UK was preparing to embark on a huge expansion in trade activity. A substantial financial source was necessary to provide the country, most especially London, with the liquidity necessary to drive the economy to this new frontier. The argument gained certain impetus after the Glorious Revolution when both William of Orange and Queen Mary simultaneously ascended the throne in 1688. Noted political economist of the time William Petty had observed the success of the Dutch in establishing a central bank in the form of the Amsterdam Wisselbank that had control over coinage, credit facilities and exchange."

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