IDEAS home Printed from https://ideas.repec.org/a/fip/fedmqr/y1984iwinnv.8no.1.html
   My bibliography  Save this article

Money and inflation in colonial Massachusetts

Author

Listed:
  • Bruce D. Smith

Abstract

This article argues that the quantity theory of money is not supported by the evidence. Contrary to the quantity theory, the article says, the value of money depends primarily on how carefully it is backed. That is, the rate of inflation depends more on underlying fiscal policies than on rates of money growth. The evidence for this argument comes from a close look at the way in which the colony of Massachusetts ended a severe long-term inflation in 1750. Other British North American colonies endured similar episodes, all of which parallel some periods of severe inflation in the 20th century United States. The 18th century evidence thus contains lessons for modern monetary policy. ; Reprinted in Quarterly Review, Fall 2002 (v. 26, no. 4)

Suggested Citation

  • Bruce D. Smith, 1984. "Money and inflation in colonial Massachusetts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
    • Handle: RePEc:fip:fedmqr:y:1984:i:win:n:v.8no.1
    as

    Download full text from publisher

    File URL: http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=167
    Download Restriction: no
    File URL: http://www.minneapolisfed.org/research/QR/QR811.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Neil Wallace, 1980. "Integrating micro and macroeconomics: an application to credit controls," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    2. E. Gerald Corrigan, 1980. "A new approach to monetary control," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    3. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rousseau, Peter L. & Stroup, Caleb, 2011. "Monetization and growth in colonial New England, 1703–1749," Explorations in Economic History, Elsevier, vol. 48(4), pages 600-613.
    2. Marco A. Espinosa-Vega & Steven Russell, 1997. "History and theory of the NAIRU: a critical review," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 4-25.
    3. Preston J. Miller & William Roberds, 1992. "How little we know about deficit policy effects," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11.
    4. Steven Russell & Marco A. Espinosa-Vega, 1990. "The inflationary effects of the use of reserve ratio reductions, or open market purchases, to reduce market interest rates: a theoretical comparison," Working Papers 1990-006, Federal Reserve Bank of St. Louis.
    5. Andreas Schabert, 2006. "Central Bank Instruments, Fiscal Policy Regimes, and the Requirements for Equilibrium Determinacy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(4), pages 742-762, October.
    6. Marco A. Espinosa-Vega & Steven Russell, 1998. "A public finance analysis of multiple reserve requirements," FRB Atlanta Working Paper 98-1, Federal Reserve Bank of Atlanta.
    7. Mark G. Guzman, 2008. "The Impact Of Paying Interest On Reserves In The Presence Of Government Deficit Financing," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 624-642, October.
    8. Marco A. Espinosa-Vega & Steven Russell, 1998. "The long-run real effects of monetary policy: Keynesian predictions from a neoclassical model," FRB Atlanta Working Paper 98-6, Federal Reserve Bank of Atlanta.
    9. Officer, Lawrence H., 2005. "The quantity theory in New England, 1703-1749: new data to analyze an old question," Explorations in Economic History, Elsevier, vol. 42(1), pages 101-121, January.
    10. James B. Bullard & Steven Russell, 1998. "Monetary steady states in a low real interest rate economy," Working Papers 1994-012, Federal Reserve Bank of St. Louis.
    11. Preston J. Miller & Neil Wallace, 1985. "International coordination of macroeconomic policies: a welfare analysis," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr.
    12. Gary Pecquet & Clifford Thies, 2010. "Money in occupied New Orleans, 1862–1868: A test of Selgin’s “salvaging” of Gresham’s Law," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(2), pages 111-126, June.
    13. Marco A. Espinosa-Vega & Steven Russell, 2001. "Stability of steady states in a model of pleasant monetarist arithmetic," FRB Atlanta Working Paper 2001-20, Federal Reserve Bank of Atlanta.
    14. Preston J. Miller & William Roberds, 1989. "How little we know about budget policy effects," FRB Atlanta Working Paper 89-4, Federal Reserve Bank of Atlanta.
    15. Bruce D. Smith, 1988. "The relationship between money and prices: some historical evidence reconsidered," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 18-32.
    16. Gary M. Pecquet & Clifford F. Thies, 2006. "Texas Treasury Warrants, 1861-1865: A Test Of The Tax-Backing Of Money," Eastern Economic Journal, Eastern Economic Association, vol. 32(2), pages 191-203, Spring.
    17. Pecquet, Gary M. & Thies, Clifford F., 2007. "Texas treasury notes and market manipulation, 1837-1842," Explorations in Economic History, Elsevier, vol. 44(1), pages 81-99, January.

    More about this item

    Keywords

    Money theory ; Economic history;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmqr:y:1984:i:win:n:v.8no.1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jannelle Ruswick). General contact details of provider: http://edirc.repec.org/data/frbmnus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.