Money and inflation in colonial Massachusetts

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Money and inflation in colonial Massachusetts

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Bruce D. Smith

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Bruce D. Smith

Abstract

This article argues that the quantity theory of money is not supported by the evidence. Contrary to the quantity theory, the article says, the value of money depends primarily on how carefully it is backed. That is, the rate of inflation depends more on underlying fiscal policies than on rates of money growth. The evidence for this argument comes from a close look at the way in which the colony of Massachusetts ended a severe long-term inflation in 1750. Other British North American colonies endured similar episodes, all of which parallel some periods of severe inflation in the 20th century United States. The 18th century evidence thus contains lessons for modern monetary policy. ; Reprinted in Quarterly Review, Fall 2002 (v. 26, no. 4)

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Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

Volume (Year): (1984)
Issue (Month): Win ()
Pages:
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Handle: RePEc:fip:fedmqr:y:1984:i:win:n:v.8no.1

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References listed on IDEAS
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E. Gerald Corrigan, 1980. "A new approach to monetary control," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall. [Downloadable!]
Neil Wallace, 1980. "Integrating micro and macroeconomics: an application to credit controls," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall. [Downloadable!]
Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Andreas Schabert, 2006. "Central Bank Instruments, Fiscal Policy Regimes, and the Requirements for Equilibrium Determinacy," Tinbergen Institute Discussion Papers 06-025/2, Tinbergen Institute. [Downloadable!]
Other versions:
- Andreas Schabert, . "Central bank Instruments, Fiscal Policy Regimes, and the Requirements for Equilibrium Determinacy," Working Papers 2003_5, Department of Economics, University of Glasgow, revised Jan 2003. [Downloadable!]
- Andreas Schabert, 2006. "Central Bank Instruments, Fiscal Policy Regimes, and the Requirements for Equilibrium Determinacy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(4), pages 742-762, October. [Downloadable!] (restricted)
Mark G. Guzman, 2006. "The impact of paying interest on reserves in the presence of government deficit financing," Economics & Management Discussion Papers em-dp2006-39, Henley Business School, Reading University. [Downloadable!]
Other versions:
- Mark G. Guzman, 2007. "The Impact of Paying Interest on Reserves in the Presence of Government Deficit Financing," Money Macro and Finance (MMF) Research Group Conference 2006 92, Money Macro and Finance Research Group. [Downloadable!]
- Mark G. Guzman, 2006. "The impact of paying interest on reserves in the presence of government deficit financing," Economic Analysis Research Group Working Papers earg-wp2006-08, Henley Business School, Reading University. [Downloadable!]
- Mark G. Guzman, 2004. "The impact of paying interest on reserves in the presence of government deficit financing," Working Papers 04-06, Federal Reserve Bank of Dallas. [Downloadable!]
- Mark G. Guzman, 2008. "The Impact Of Paying Interest On Reserves In The Presence Of Government Deficit Financing," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 624-642, October. [Downloadable!] (restricted)
Marco Espinosa-Vega & Steven Russell, 2001. "Stability of steady states in a model of pleasant monetarist arithmetic," Working Paper 2001-20, Federal Reserve Bank of Atlanta. [Downloadable!]
Preston J. Miller & William Roberds, 1992. "How little we know about deficit policy effects," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11. [Downloadable!]
Marco Espinosa-Vega & Steven Russell, 1998. "The long-run real effects of monetary policy: Keynesian predictions from a neoclassical model," Working Paper 98-6, Federal Reserve Bank of Atlanta. [Downloadable!]
Preston J. Miller & Will Roberds, 1989. "How little we know about budget policy effects," Staff Report 120, Federal Reserve Bank of Minneapolis. [Downloadable!]
Other versions:
- Preston J. Miller & William Roberds, 1989. "How little we know about budget policy effects," Working Paper 89-4, Federal Reserve Bank of Atlanta.
Steven Russell & Marco Espinosa, 1990. "The inflationary effects of the use of reserve ratio reductions, or open market purchases, to reduce market interest rates: a theoretical comparison," Working Papers 1990-006, Federal Reserve Bank of St. Louis. [Downloadable!]
Marco Espinosa-Vega & Steven Russell, 1999. "A public finance analysis of multiple reserve requirements," Working Paper 99-19, Federal Reserve Bank of Atlanta. [Downloadable!]
Other versions:
- Marco Espinosa-Vega & Steven Russell, 1998. "A public finance analysis of multiple reserve requirements," Working Paper 98-1, Federal Reserve Bank of Atlanta. [Downloadable!]
Bruce D. Smith, 1988. "The relationship between money and prices: some historical evidence reconsidered," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 18-32. [Downloadable!]
James Bullard & Steve Russell, 1998. "Monetary steady states in a low real interest rate economy," Working Papers 1994-012, Federal Reserve Bank of St. Louis. [Downloadable!]
Gary M. Pecquet & Clifford F. Thies, 2006. "Texas Treasury Warrants, 1861-1865: A Test Of The Tax-Backing Of Money," Eastern Economic Journal, Eastern Economic Association, vol. 32(2), pages 191-203, Spring. [Downloadable!]
Preston J. Miller & Neil Wallace, 1985. "International coordination of macroeconomic policies: a welfare analysis," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr. [Downloadable!]
Marco A. Espinosa-Vega & Steven Russell, 1997. "History and theory of the NAIRU: a critical review," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 4-25. [Downloadable!]

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