BOE Says It's Not to Blame for Century-Old U.S. Financial Crises

The Bank of England says its interest-rate changes in the early part of the 20th century didn’t inflame economic crises in the U.S. at that time.

In a working paper published Friday, BOE analyst Georgina Green said her findings go against an accepted view that the central bank must bear some responsibility.

“The convertibility of currencies into gold and the absence of a U.S. central bank to stem gold outflows led to a consensus in the literature that the Bank was, at least partly, responsible for U.S. crises,” she wrote. But estimates from her new measure of monetary-policy shocks “suggest that any spillover to the U.S. was small and transitory and did not have important real effects.”

It’s not known if the paper is intended to avoid President Donald Trump moving on from trade tariffs to considering retaliatory measures for Britain’s alleged role in debilitating the U.S. economy more-than a century ago.

If that’s the case, it’s not all good news. Green notes that the BOE may still have influenced the development of the U.S. “through other means” such as restrictions on gold, as it did in 1906.

The BOE sometimes avoided extreme movement in its interest rate by placing obstacles in the way of gold exports, facilitating imports and charging a premium on the metal.

The full paper is available here.