Crisis Chronicles: The British Export Bubble of 1810 and Pegged versus Floating Exchange Rates
Abstract: In the early 1800s, Napoleon?s plan to defeat Britain was to destroy its ability to trade. The plan, however, was initially foiled. After Britain helped the Portuguese government flee Napoleon in 1807, the Portuguese returned the favor by opening Brazil to British exports?a move that caused trade to boom. In addition, Britain was able to circumvent Napoleon?s continental blockade by means of a North Sea route through the Baltics, which provided continental Europe with a conduit for commodities from the Americas. But when Britain?s trade via the North Sea was interrupted in 1810, the boom ended in crisis. In this edition of Crisis Chronicles, we explore the British Export Bubble of 1810 and ask whether pegged or floating exchange rates are better for an economy.
JEL Classification: F00;G1;N2;
Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2014-09-05