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Fighting the Last War: Economists on the Lender of Last Resort
Grossman, Richard
Rockoff, Hugh T
Hugh Rockoff
In this paper we trace the evolution of the lender of last resort doctrine—and its implementation—from the nineteenth century through the panic of 2008. We find that typically the most influential economists "fight the last war": formulating policy guidelines that would have dealt effectively with the last crisis or in some cases the last two or three. This applies even to the still supreme voice among lender-of-last-resort theorists, Walter Bagehot, who wrestled with the how to deal with the financial crises that hit Britain between the end of the Napoleonic Wars and the panic of 1866. Fighting the last war may leave economists unprepared for meeting effectively the challenge of the next war.
Grossman, Richard & Rockoff, Hugh T, 2015. "Fighting the Last War: Economists on the Lender of Last Resort," CEPR Discussion Papers 10361, C.E.P.R. Discussion Papers.
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Bagehot; Bank of England; central banks; lender of last resort; subprime crisis;
B0 - Schools of Economic Thought and Methodology - - General
N2 - Economic History - - Financial Markets and Institutions
NEP-CBA-2015-02-05 (Central Banking)
NEP-HIS-2015-02-05 (Business, Economic & Financial History)
NEP-HPE-2015-02-05 (History & Philosophy of Economics)
NEP-MON-2015-02-05 (Monetary Economics)
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