The Option Value of Confederate Currency and Inflation Control, 1861-1865
Confederate Treasury notes were convertible into government bonds at par. This provided an imbedded option value for the currency. Confederate interest-rate policy encouraged, and ultimately coerced, holders of Treasury notes to exchange these notes for bonds by imposing deadlines on their convertibility. In this paper we identify a long-run equilibrium relationship between the gold value of the bonds and the gold value of Confederate currency. We also show that the three funding acts aimed at precipitating the conversion of currency into bonds were effective in temporarily dampening inflationary pressures.
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- Weidenmier, Marc D., 2000. "The Market for Confederate Cotton Bonds," Explorations in Economic History, Elsevier, vol. 37(1), pages 76-97, January.
- 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 461-472, August.
- Richard C.K. Burdekin & Marc D. Weidenmier, "undated". "Inflation is Always and Everywhere a Monetary Phenomenon: Richmond vs. Houston in 1864," Claremont Colleges Working Papers 1999-31, Claremont Colleges.
- Burdekin Richard C. K. & Langdana Farrokh K., 1993. "War Finance in the Southern Confederacy, 1861-1865," Explorations in Economic History, Elsevier, vol. 30(3), pages 352-376, July.
- Davis, George K. & Pecquet, Gary M., 1990. "Interest Rates in the Civil War South," The Journal of Economic History, Cambridge University Press, vol. 50(01), pages 133-148, March.
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