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Circulating Interest-Bearing Currency: An Arkansan Experiment, 1861-1863

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Author Info
Richard C.K. Burdekin (Claremont McKenna College)
Marc D. Weidenmier (Claremont McKenna College)

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Abstract

During the Civil War the Arkansas legislature funded their expenditures primarily through interest-bearing warrants and war bonds. After these issues were made legal tender in November 1861, the discount attributed to them disappeared immediately and they began to circulate widely. In mid-1862 they were being accepted on par with specie even when Confederate notes - which were also made legal tender in November 1861 - were taken only at a substantial discount. This dominance of legal tender interest-bearing currency is consistent with legal restrictions theory. Confederate notes supplanted the Arkansas issues only after the legislature suspended interest payments in November 1862.

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Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2003-04.

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Handle: RePEc:clm:clmeco:2003-04

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Related research
Keywords: Legal restrictions interest-bearing currency state finance

Find related papers by JEL classification:
N42 - Economic History - - Government, War, Law, and Regulation - - - U.S.; Canada: 1913-
N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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  1. Richard C.K. Burdekin & Marc D. Weidenmier, . "Interest-Bearing Currency and Legal Restrictions Theory: Lessons from the Southern Confederacy," Claremont Colleges Working Papers 1999-14, Claremont Colleges. [Downloadable!]
  2. Makinen, Gail E & Woodward, G Thomas, 1999. "Use of Interest-Bearing Currency in the Civil War: The Experience below the Mason-Dixon Line," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 121-29, February.
  3. Cowen, Tyler & Kroszner, Randall, 1989. "Scottish Banking before 1845: A Model for Laissez-Faire?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 221-31, May. [Downloadable!] (restricted)
  4. Richard C. K. Burdekin & Marc D. Weidenmier, 2001. "Inflation Is Always and Everywhere a Monetary Phenomenon: Richmond vs. Houston in 1864," American Economic Review, American Economic Association, vol. 91(5), pages 1621-1630, December. [Downloadable!] (restricted)
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  5. Gorton, Gary, 1996. "Reputation Formation in Early Bank Note Markets," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 346-97, April. [Downloadable!] (restricted)
  6. Makinen, Gail E & Woodward, G Thomas, 1986. "Some Anecdotal Evidence Relating to the Legal Restrictions Theory of the Demand for Money," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 260-65, April. [Downloadable!] (restricted)
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