Interest rates under the U.S. national banking system
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 against note issue, itself an implication of the fact that some eligible collateral was not used for that purpose, 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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- 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.
- Kuehlwein, Michael, 1992. "The National Bank Note Controversy Reexamined," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(1), pages 111-26, February.
- 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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