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A New Approach to Explaining the Value of Colonial Paper Money: Evidence from New Jersey, 1709-1775

Listed author(s):
  • FARLEY GRUBB

    ()

    (Department of Economics,University of Delaware)

A new approach to explaining the value of colonial paper money that relies on their distinctive character as bills of credit is presented. The market value of these bills is decomposed into their real asset present value and their liquidity premium value. This approach is applied to the newly reconstructed monetary data for colonial New Jersey. The real asset present value of New Jersey bills accounted for at least 80 percent, whereas the value of these bills as “money” accounted for at most 10 to 20 percent, of their market value. Colonial paper money was not primarily a fiat currency.

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File URL: http://www.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2014/UDWP2014-08.pdf
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Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 14-08.

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Length: 49 pages
Date of creation: 2014
Handle: RePEc:dlw:wpaper:14-08.
Contact details of provider: Postal:
Purnell Hall, Newark, Delaware 19716

Phone: (302) 831-2565
Fax: (302) 831-6968
Web page: http://lerner.udel.edu/departments/economics/department-economics/

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  1. Alvin Rabushka, 2008. "Introduction to Taxation in Colonial America," Introductory Chapters,in: Taxation in Colonial America Princeton University Press.
  2. 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.
  3. McCallum, Bennett T, 1992. "Money and Prices in Colonial America: A New Test of Competing Theories," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 143-161, February.
  4. Sumner, Scott, 1993. "Colonial Currency and the Quantity Theory of Money: A Critique of Smith's Interpretation," The Journal of Economic History, Cambridge University Press, vol. 53(01), pages 139-145, March.
  5. Thomas J. Sargent, 1982. "The Ends of Four Big Inflations," NBER Chapters,in: Inflation: Causes and Effects, pages 41-98 National Bureau of Economic Research, Inc.
  6. Rousseau, Peter L., 2006. "A common currency: early US monetary policy and the transition to the dollar," Financial History Review, Cambridge University Press, vol. 13(01), pages 97-122, April.
  7. Farley Grubb, 2003. "Creating the U.S. Dollar Currency Union, 1748–1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain?," American Economic Review, American Economic Association, vol. 93(5), pages 1778-1798, December.
  8. Thayer, Theodore, 1953. "The Land-Bank System in the American Colonies," The Journal of Economic History, Cambridge University Press, vol. 13(02), pages 145-159, March.
  9. Bruce D. Smith, 1985. "American Colonial Monetary Regimes: The Failure of the Quantity Theory and Some Evidence in Favour of an Alternative View," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 531-565, August.
  10. 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.
  11. Hanson, John R, II, 1979. "Money in the Colonial American Economy: An Extension," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 281-286, April.
  12. Grubb, Farley, 1988. "The Auction of Redemptioner Servants, Philadelphia, 1771–1804: An Economic Analysis," The Journal of Economic History, Cambridge University Press, vol. 48(03), pages 583-603, September.
  13. Michener, Ron, 1988. "Backing Theories and the Currencies of Eighteenth-Century America: A Comment," The Journal of Economic History, Cambridge University Press, vol. 48(03), pages 682-692, September.
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