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Money and Prices in Colonial America: A New Test of Competing Theories

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McCallum, Bennett T

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Abstract

In a long-standing controversy over monetary experiences in colonial America, the main substantive issue concerns large and rapid increases in stocks of paper currency that were followed by negligible changes in price levels. The "backing theory" or anticlassical interpretation is that prices failed to respond to major increases in total money supplies. The "quantity theory" or classical hypothesis, by contrast, is that specie was exported in amounts that left total money stocks approximately unchanged. This paper develops and applies a strategy for resolving this fundamental disagreement despite the absence of data on stocks and flows of specie. Copyright 1992 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 100 (1992)
Issue (Month): 1 (February)
Pages: 143-61
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Handle: RePEc:ucp:jpolec:v:100:y:1992:i:1:p:143-61

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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.:
  1. West, Robert Craig, 1978. "Money in the Colonial American Economy," Economic Inquiry, Oxford University Press, vol. 16(1), pages 1-15, January.
  2. Calomiris, Charles W., 1988. "Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental," The Journal of Economic History, Cambridge University Press, vol. 48(01), pages 47-68, March. [Downloadable!]
  3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec.. [Downloadable!] (restricted)
  4. Michener, Ronald, 1987. "Fixed exchange rates and the quantity theory in colonial America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 233-307, January. [Downloadable!] (restricted)
  5. Bruce D. Smith, 1985. "American Colonial Monetary Regimes: The Failure of the Quantity Theory and Some Evidence in Favour of an Alternative View," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 531-65, August. [Downloadable!] (restricted)
  6. Bennett T. McCallum, 1984. "The Role of Overlapping-Generations Models in Monetary Economics," NBER Working Papers 0989, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall. [Downloadable!]
  8. Hanson, John R, II, 1979. "Money in the Colonial American Economy: An Extension," Economic Inquiry, Oxford University Press, vol. 17(2), pages 281-86, April.
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(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.)

  1. Ronald W. Michener and Robert E. Wright, 2006. "Miscounting Money of Colonial America," Econ Journal Watch, Atlas Economic Research Foundation, vol. 3(2), pages 4-44, May. [Downloadable!]
  2. Michael F. Sproul, 2003. "There's No Such Thing As Fiat Money," UCLA Economics Working Papers 830, UCLA Department of Economics. [Downloadable!]
  3. 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!]
  4. Peter L. Rousseau, 2009. "Monetary Policy and the Dollar," NBER Working Papers 14993, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Farley Grubb, 2005. "Two Theories of Money Reconciled: The Colonial Puzzle Revisited with New Evidence," NBER Working Papers 11784, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Peter L. Rousseau, 2007. "Backing, the Quantity Theory, and the Transition to the U.S. Dollar, 1723-1850," NBER Working Papers 12835, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Michael Sproul, 1998. "The Quantity Theory versus the Real Bills Doctrine in Colonial America," UCLA Economics Working Papers 775B, UCLA Department of Economics. [Downloadable!]
  8. Michael F. Sproul, 1997. "The Real Bills Doctrine: A Restatement," Macroeconomics 9711001, EconWPA. [Downloadable!]
  9. Michael Sproul, 1999. "Backed Money, Fiat Money and the Real Bills Doctrine," UCLA Economics Working Papers 789, UCLA Department of Economics. [Downloadable!]
    Other versions:
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