Backing, the Quantity Theory, and the Transition to the U.S. Dollar, 1723-1850
AbstractAmong the thirteen original colonies, Pennsylvania was most successful at issuing paper money with only minimal effects on prices -- so much so that the colony's experience is sometimes seen as violating the classical quantity theory of money. Quantity theorists usually attribute this apparent anomaly to mismeasurement of the money stock. In contrast, I use data on money, prices, and real activity in Pennsylvania from 1723 to 1774 and for the United States as a whole from 1790 to 1850 (when the money stock is better measured) to show that the long-run behavior of money and prices is well explained by the quantity theory in both periods, despite the differences in institutional arrangements, once growth in monetized transactions is taken into account.
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Date of creation: Jan 2007
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- Peter L. Rousseau, 2007. "Backing, the Quantity Theory, and the Transition to the US Dollar, 1723–1850," American Economic Review, American Economic Association, vol. 97(2), pages 266-270, May.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-28 (All new papers)
- NEP-HIS-2007-01-28 (Business, Economic & Financial History)
- NEP-MAC-2007-01-28 (Macroeconomics)
- NEP-MON-2007-01-28 (Monetary Economics)
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