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The Paper Money of Colonial North Carolina, 1712-1774

Listed author(s):
  • Cory Cutsail
  • Farley Grubb

Beginning in 1712, North Carolina’s assembly emitted its own paper money and maintained some of its paper money in public circulation for the rest of the colonial period. This paper money has been reviled as an archetype of what was bad about the paper monies issued by American colonial legislatures. Yet little systematic analysis of North Carolina’s paper money has been undertaken. We correct that here. We reconstruct North Carolina’s paper money regime from original sources—providing yearly quantitative data on printings, net new emissions, redemptions and removals, amounts remaining in circulation, denominational structure, as well as the paper money’s current market value in pounds sterling. We identify different paper money regimes based on how the assembly structured and executed its paper money laws. We model and estimate how the market value of this money was determined. We compare the quantity theory of money with an asset-pricing model that treats the money as zero-coupon bonds to see which explains the observed market value of the paper money better. The asset-pricing model wins by a mile. Finally, we explore counterfactual redemption architectures to show how redemption affected monetary performance in periods of value collapse.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23783.

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Date of creation: Sep 2017
Handle: RePEc:nbr:nberwo:23783
Note: DAE
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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. Peter L. Rousseau, 2007. "Backing, the Quantity Theory, and the Transition to the US Dollar, 1723–1850," American Economic Review, American Economic Association, vol. 97(2), pages 266-270, May.
  3. Carter,Susan B. & Gartner,Scott Sigmund & Haines,Michael R. & Olmstead,Alan L. & Sutch,Richard & Wri (ed.), 2006. "The Historical Statistics of the United States 5 Volume Hardback Set," Cambridge Books, Cambridge University Press, number 9780521817912, March.
  4. Grubb, Farley, 2010. "Testing for the Economic Impact of the U.S. Constitution: Purchasing Power Parity Across the Colonies versus Across the States, 1748–1811," The Journal of Economic History, Cambridge University Press, vol. 70(01), pages 118-145, March.
  5. Smith, Bruce D, 1985. "Some Colonial Evidence on Two Theories of Money: Maryland and the Carolinas," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1178-1211, December.
  6. Grubb, Farley, 2004. "The circulating medium of exchange in colonial Pennsylvania, 1729-1775: new estimates of monetary composition, performance, and economic growth," Explorations in Economic History, Elsevier, vol. 41(4), pages 329-360, October.
  7. Egnal, Marc, 1998. "New World Economies: The Growth of the Thirteen Colonies and Early Canada," OUP Catalogue, Oxford University Press, number 9780195114829.
  8. Angela Redish, 1993. "Anchors Aweigh: The Transition from Commodity Money to Fiat Money in Western Economies," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 777-795, November.
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