Bank Rate policy in Norway, 1893–1914

Abstract

The article discusses Bank Rate policy in Norway in the last two decades of the classical gold standard. The empirical mainstay is a detailed examination of rate changes. The key finding is that Bank Rate changes not were decided in accordance with a single monetary rule or criterion, but were influenced by a broader set of considerations. In particular, Norges Bank was sensitive to the needs of business and the state of domestic money market.

Notes

1. The law was effective as of 1 January 1893.

2. The term is usually attributed to John Maynard Keynes and his attack on the British deflationary policies of the 1920s. , John M. Keynes, The Economic Consequences of Mr. Churchill (London: Hogarth Press, 1925).

3. Wilhelm Keilhau, Den norske pengehistorie (Oslo: Aschehoug, 1952), 124–5.

4. For a brief, but excellent summary of the research frontier, see the introduction pages in: Jamie Reis, ‘An “Art”, not a “Science”? Central Bank Management in Portugal under the Gold Standard1863–87’, The Economic History Review 60, no. 4 (2007): 712–41.

5. See, for example: Marc Flandreau and Harold James, introduction to International Financial History in the Twentieth Century. System and Anarchy, by Marc Flandreau, Carl-Ludwig Holtfrerich and Harold James (Cambridge, New York: University Press, 2003).

6. Recommendations of the Royal Commission (appointed 6 December 1884): on the revision of the legislation regarding Norges Bank, p. 19; Ebbe Hertzberg, En kritisk fremstilling af grundsætningerne for seddelbankers indretning og virksomhed med særligt hensyn til de skandinaviske seddelbanker i deres nuværende skikkelse (Oslo: Kristiania, 1877), 46; A.N. Kiær, Om seddelbanker: en kritisk fremstilling af grundsætningerne for seddelbankers indretning og virksomhed med særligt hensyn til de skandinaviske seddelbanker i deres nuværende skikkelse (Kristiania, 1877), 100.

7. Lars Fredrik Øksendal, ‘Monetary Policy under the Gold Standard – Examining the Case of Norway 1893–1914’, in Essays in Norwegian Monetary History (PhD diss., Norwegian School of Economics and Business Administration, 2007), 137–43.

8. Parliamentary proceedings: Odelstingsproposisjon no. 24 (1882) Om endringer i lovgivningen angaaende Norges Bank, p. 28.

9. Parliamentary proceedings: Odelstingsproposisjon no. 24 (1882) Om endringer i lovgivningen angaaende Norges Bank, p. 28.

10. The literature is numerous. For one typical example see John Dutton, The Bank of England and the Rules of the Games under the International Gold Standard: New Evidence, in A Retrospective on the Classical Gold Standard, 1821–1931, by Michael D. Bordo and Anna J. Schwartz (National Bureau of Economics Research, 1984).

11. Farmand, December 17, 1898 – the quote is taken from a letter from Governor Bomhoff to the Editor of Farmand, Einar Sund, and published in the journal with the author's consent.

12. See Norges Bank – Annual Report 1911 and 1912.

13. Farmand, March 7, 1896; March 21, 1896; March 28, 1896.

14. Farmand, August 22, 1896.

15. Farmand, August 15, 1896.

16. Farmand, August 29, 1896.

17. Farmand, September 12, 1896; September 19, 1896; September 26,1896.

18. Farmand, October 3, 1896.

19. Farmand, October 12, 1896.

20. Farmand, December 19, 1896.

21. Farmand, January 30, 1897; February 13, 1897; February 20, 1897.

22. Farmand, February 27, 1897.

23. Farmand, May 15, 1897.

24. The Scandinavian short-term money markets were quite integrated, and funds were regularly shifted across borders in order to accommodate differing seasonal peaks in the demand for money. For more on the Scandinavian money market, see Lars Fredrik Øksendal, ‘The Impact of the Scandinavian Monetary Union on Financial Market Integration’, Financial History Review, 2 (2007).

25. Farmand, June 12, 1897; June 19, 1897.

26. Farmand, July 3, 1897.

27. Farmand, August 7, 1897.

28. Farmand, January 22, 1897.

29. Farmand, September 3, 1898; September 10, 1898; September 17, 1898.

30. Farmand, September 3, 1898.

31. Farmand, September 24, 1898.

32. Farmand, October 1, 1898.

33. Farmand, October 8, 1898.

34. Farmand, October 15, 1898.

35. Farmand, November 5, 1898; November 12, 1898.

36. Farmand, December 3, 1898.

37. Farmand, December 3, 1898.

38. Farmand, January 7, 1899.

39. Norges Bank – Annual Report 1899.

40. Norges Bank – Annual Report 1899.

41. Norges Bank – Annual Report 1899.

42. Parliamentary proceedings: Stortingstidende (1900–01), pp. 959–69.

43. Norges Bank – Annual Report 1899; Farmand, October 7, 1899.

44. Norges Bank – Annual Report 1900.

45. Farmand, January 19, 1901.

46. Norges Bank – Annual Report 1900.

47. Farmand, August 17, 1901.

48. Farmand, August 24, 1901; August 31, 1901.

49. Farmand, September 7, 1901.

50. Norges Bank – Annual Report 1901.

51. Norges Bank – Annual Report 1902. Farmand estimated the value of the increased corn import at roughly eight million kroner. Farmand, September 12, 1903.

52. Farmand, December 6, 1902.

53. Farmand, December 6, 1902.

54. Farmand, May 23, 1903.

55. Farmand, September 24, 1903.

56. Farmand, July 16, 1904.

57. Farmand, August 6, 1904.

58. Farmand, August 20,1904.

59. Farmand. August 1, 1904; August 8, 1904; Augsut 15, 1904.

60. Farmand, January 14, 1905.

61. Farmand, January 28, 1905; February 4, 1905; February 11, 1905.

62. Farmand, January 18, 1905.

63. Norges Bank – Annual Report 1905.

64. Farmand, December 2, 1905.

65. Farmand, December 16, 1905.

66. Farmand, January 20, 1906; January 27, 1906; February 3, 1906; February 10, 1906; February 17, 1906; February 24, 1906.

67. Farmand, October 13, 1906.

68. Farmand, November 24, 1907.

69. Farmand, March 9, 1907.

70. Norges Bank – Annual Report 1907.

71. Farmand, December 21, 1907.

72. Farmand, August 8, 1908; August 15, 1908.

73. Norges Bank – Annual Report 1908.

74. Norges Bank – Annual Report 1909.

75. Norges Bank – Annual Report 1910.

76. Farmand, September 30, 1911.

77. Norges Bank – Annual Report 1911.

78. Farmand, March 9, 1912; March 16, 1912.

79. Norges Bank – Annual Report 1912.

80. Norges Bank – Annual Report 1913.

81. Farmand, January 23, 1914.

82. Farmand, June 24, 1914.

83. The results for the whole period as well as for 1899–1905 are statistically significant at the 1% level, the result for the later period at the 5% level, while the result for the first period is not statistically significant.

84. Interest rate differentials are here calculated as domestic Bank Rate minus foreign rate. Thus, a positive differential denotes a higher domestic Bank Rate level than abroad.

85. Jan Tore Klovland, De historiske båndene til Europa, in Europa - forskning om ⊘konomisk integrasjon, edited by Victor Norman (Årbok: SN, 1995).

86. Bomhoff served as a liberal Member of Parliament 1894-97 while simultaneously being Governor of the central bank.

87. Parliamentary proceedings: Stortingstidende (1895), p. 2005ff

88. Klovland, De historiske båndene til Europa.

89. Lars Fredrik Øksendal, ‘The impact of the Scandinavian Monetary Union on Financial Market Integration, Financial History Review 2 (2007).