Float on a Note
AbstractFrom 1863-1914, banks in the U.S. could issue notes subject to full collateral, a per-period tax on outstanding notes, redemption of notes on demand, and a clearing fee per issued note cleared through the Treasury. The system failed to satisfy a purported arbitrage condition; i.e., the yield on collateral exceeded the tax rate plus the product of the clearing fee and the average clearing rate of notes. The failure is explained by a model in which note issuers choose to issue notes only in trades that both produce a low clearing rate (high float) and are subject to diminishing returns
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 538.
Date of creation: 11 Aug 2004
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national banking system; note issuance; float;
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- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
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- Charles W. Calomiris & Joseph R. Mason, 2005.
"Resolving the puzzle of the underissuance of national bank notes,"
05-19, Federal Reserve Bank of Philadelphia.
- Calomiris, Charles W. & Mason, Joseph R., 2008. "Resolving the puzzle of the underissuance of national bank notes," Explorations in Economic History, Elsevier, vol. 45(4), pages 327-355, September.
- Charles W. Calomiris & Joseph R. Mason, 2004. "Resolving the Puzzle of the Underissuance of National Bank Notes," NBER Working Papers 10951, National Bureau of Economic Research, Inc.
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