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Monetization and Growth in Colonial New England, 1703-1749

  • Peter L. Rousseau
  • Caleb Stroup

We examine econometrically the real effects of paper money's introduction into colonial New England over the 1703-1749 period. Departing from earlier analyses that focus primarily on the depreciation of paper money in the region, we show that expansion of the money stock promoted growth in modern sector activity and not the other way around. We also find that bills emitted for seigniorage purposes had a positive effect on the modern sector, while bills issued through loan banks did not.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16190.

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Date of creation: Jul 2010
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Publication status: published as Rousseau, Peter L. & Stroup, Caleb, 2011. "Monetization and growth in colonial New England, 1703รข1749," Explorations in Economic History, Elsevier, vol. 48(4), pages 600-613.
Handle: RePEc:nbr:nberwo:16190
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  1. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 657-78, November.
  2. Peter L. Rousseau, 2009. "Monetary Policy and the Dollar," Vanderbilt University Department of Economics Working Papers 0913, Vanderbilt University Department of Economics.
  3. McCusker, John J., 1970. "The Rum Trade and the Balance of Payments of the Thirteen Continental Colonies, 1650โ€“1775," The Journal of Economic History, Cambridge University Press, vol. 30(01), pages 244-247, March.
  4. 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.
  5. 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 143-61, February.
  6. Peter L. Rousseau & Richard Sylla, 1999. "Emerging Financial Markets and Early U.S. Growth," NBER Working Papers 7448, National Bureau of Economic Research, Inc.
  7. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  8. 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 531-65, August.
  9. Peter L. Rousseau, 2007. "Backing, the Quantity Theory, and the Transition to the US Dollar, 1723โ€“1850," American Economic Review, American Economic Association, vol. 97(2), pages 266-270, May.
  10. 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 461-72, August.
  11. 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.
  12. Farley Grubb, 2003. "Two Theories of Money Reconciled: The Colonial Puzzle Revisited with New Evidence," Working Papers 03-03, University of Delaware, Department of Economics.
  13. Goldberg, Dror, 2011. "Why was America's First Bank Aborted?," The Journal of Economic History, Cambridge University Press, vol. 71(01), pages 211-222, March.
  14. West, Robert Craig, 1978. "Money in the Colonial American Economy," Economic Inquiry, Western Economic Association International, vol. 16(1), pages 1-15, January.
  15. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  16. Richard A. Lester, 1938. "Currency Issues to Overcome Depressions in Pennsylvania, 1723 and 1729," Journal of Political Economy, University of Chicago Press, vol. 46, pages 324.
  17. Michener, Ronald, 1987. "Fixed exchange rates and the quantity theory in colonial America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 233-307, January.
  18. Bruce D. Smith, 1984. "Money and inflation in colonial Massachusetts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
  19. Richard A. Lester, 1939. "Currency Issues to Overcome Depressions in Delaware, New Jersey, New York and Maryland, 1715-37," Journal of Political Economy, University of Chicago Press, vol. 47, pages 182.
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