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Suppressing Asset Price Inflation: The Confederate Experience, 1861-1865

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  • Marc D. Weidenmier
  • Richard C.K. Burdekin

Abstract

Confederate monetary reforms encouraged holders of Treasury notes to exchange these notes for bonds by imposing deadlines on their convertibility. We show that Confederate funding acts aimed at precipitating the conversion of currency into bonds did temporarily suppress currency depreciation. These acts also triggered upsurges in commodity prices, however, as note holders rushed to spend the currency before their exchange rights were reduced. Asset price stabilization policies seem to have increased the velocity of circulation and counterproductively channeled inflationary pressures into other areas of the economy.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9230.

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Date of creation: Sep 2002
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Publication status: published as Richard C. K. Burdekin & Marc D. Weidenmier, 2003. "Suppressing Asset Price Inflation: The Confederate Experience, 1861--1865," Economic Inquiry, Oxford University Press, vol. 41(3), pages 420-432, July.
Handle: RePEc:nbr:nberwo:9230

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  1. Weidenmier, Marc D., 2000. "The Market for Confederate Cotton Bonds," Explorations in Economic History, Elsevier, Elsevier, vol. 37(1), pages 76-97, January.
  2. 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, American Economic Association, vol. 91(5), pages 1621-1630, December.
  3. Davis, George K. & Pecquet, Gary M., 1990. "Interest Rates in the Civil War South," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 50(01), pages 133-148, March.
  4. Ben Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 77-128.
  5. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
  6. Marc D. Weidenmier, . "Turning Points during the U.S. Civil War: Views from the Grayback Market," Claremont Colleges Working Papers, Claremont Colleges 1999-24, Claremont Colleges.
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Cited by:
  1. Richard C.K.Burdekin & Marc D.Weidenmier, 2002. "Interest-Bearing Currency and Legal Restrictions Theory:Lessons from the Southern Confederacy," Cato Journal, Cato Journal, Cato Institute, vol. 22(2), pages 199-209, Fall.
  2. Buiter, Willem H, 2004. "Helicopter Money: Irredeemable Fiat Money and the Liquidity Trap," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4202, C.E.P.R. Discussion Papers.
  3. Marc Weidenmier, 2004. "Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy," NBER Working Papers 10960, National Bureau of Economic Research, Inc.

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