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Interest Rates Under the U.S. National Banking System

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Author Info

  • Bruce Champ

    (University of Western Ontario)

  • Neil Wallace

    (University of Minnesota and FRB, Minneapolis)

  • Warren Weber

    (FRB, Minneapolis and University of Minnesota)

Abstract

According to previous studies, the demand-liability feature of national bank notes did not present a problem for note-issuing banks because the nonbank public treated notes and other currency as perfect substitutes. However, that view, when combined with nonbindingness of the collateral restriction a against note issue, itself an implication of the fact that not all eligible co collateral was used as collateral, implies that the safe short-term interest rate is pegged at the tax rate on note circulation. Since evidence on short- term interest rates is inconsistent with such a peg, that view must be rejected.

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File URL: http://128.118.178.162/eps/eh/papers/9310/9310001.doc.gz
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Bibliographic Info

Paper provided by EconWPA in its series Economic History with number 9310001.

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Length: 19 pages
Date of creation: 01 Oct 1993
Date of revision:
Handle: RePEc:wpa:wuwpeh:9310001

Note: 19 pages, text WordPerfect format, figures available from Weber
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Web page: http://128.118.178.162

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References

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  1. Cagan, Phillip & Schwartz, Anna J, 1991. "The National Bank Note Puzzle Reinterpreted," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 293-307, August.
  2. Kuehlwein, Michael, 1992. "The National Bank Note Controversy Reexamined," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(1), pages 111-26, February.
  3. James, John A, 1976. "The Conundrum of the Low Issue of National Bank Notes," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 359-67, April.
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Citations

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Cited by:
  1. Charles M. Kahn & William Roberds, 1999. "Demandable debt as a means of payment: banknotes versus checks," Proceedings, Federal Reserve Bank of Cleveland, pages 500-530.
  2. Weber, Warren E., 2003. "Interbank payments relationships in the antebellum United States: evidence from Pennsylvania," Journal of Monetary Economics, Elsevier, vol. 50(2), pages 455-474, March.
  3. Ricardo de O. Cavalcanti & Andres Erosa & Ted Temzelides, 1999. "Private money and reserve management in a random-matching model," Discussion Paper / Institute for Empirical Macroeconomics 128, Federal Reserve Bank of Minneapolis.
  4. Stephen Quinn & William Roberds, 2008. "The evolution of the check as a means of payment: a historical survey," Economic Review, Federal Reserve Bank of Atlanta.
  5. Tao Zhu & Neil Wallace, 2004. "Float on a Note," 2004 Meeting Papers 342, Society for Economic Dynamics.
  6. Bruce Champ & Neil Wallace, 2003. "Resolving the National Banking System note-issue puzzle," Working Paper 0316, Federal Reserve Bank of Cleveland.
  7. Antoine Martin & Cyril Monnet & Warren E. Weber, 2000. "Costly banknote issuance and interest rates under the national banking system," Working Papers 601, Federal Reserve Bank of Minneapolis.
  8. Bullard, James & Smith, Bruce D., 2003. "Intermediaries and payments instruments," Journal of Economic Theory, Elsevier, vol. 109(2), pages 172-197, April.
  9. Li, Yiting, 2006. "Banks, private money, and government regulation," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2067-2083, November.
  10. Leo Ferraris, 2002. "Money and credit in random matching models of money," Working Papers 59, University of Rome La Sapienza, Department of Public Economics.
  11. Wallace, Neil & Zhu, Tao, 2007. "Float on a note," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 229-246, March.
  12. Bruce Champ, 2007. "The National Banking System: empirical observations," Working Paper 0719, Federal Reserve Bank of Cleveland.

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