ABSTRACT
The Bank Restriction Period (1797–1821) was the sole British experience with a paper standard and floating exchange rate to 1914. Contemporary observers disagreed vigorously about the relationships among the price level, exchange rate, and money supply (represented by Bank of England notes). On one side were the bullionists, comparable with modern monetarists. They argued that Bank of England notes determined the price level, which then determined the exchange rate. On the other side were the antibullionists, who emphasized non-monetary influences on the exchange rate, which helped to determine the price level, which was then accommodated by Bank of England note circulation. A modern bullionist theory partially bridges the gap between the two camps; its focus is on Bank of England note circulation determined by demand and supply. Superior data and more sophisticated techniques than those of previous authors are employed to test the three positions. Evidence is preponderantly in favour of the antibullionist approach, which ironically is out of fashion in modern macroeconomics.
