This article describes a debate about the validity of the quantity theory of money and offers further evidence against it. The evidence is primarily from the North American colonies of Virginia, New York, and Pennsylvania and regards the issue of measuring the money supply. Studies have shown that changes in colonial money and inflation are inconsistent with the quantity theory. Some have argued that those studies measure money wrong: specie belongs in the measure because the colonies were on a fixed exchange rate system with Britain; changes in colonial paper money were offset by specie flows. When specie is counted, the quantity theory stands. This study responds with evidence that the critics are wrong: the colonies had no such fixed exchange rate regime, and movements in the stock of colonial paper currency cannot have been offset by specie flows. ; 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.
References listed on IDEAS 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.:
Thomas J. Sargent, 1982.
"The Ends of Four Big Inflations,"
NBER Chapters,
in: Inflation: Causes and Effects, pages 41-98
National Bureau of Economic Research, Inc.
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