Interest Rates Under the U.S. National Banking System
According to previous studies, the demand-liability feature of national bank notes did not present a problem for note-issuing banks because the nonbank public treated notes and other currency as perfect substitutes. However, that view, when combined with nonbindingness of the collateral restriction a against note issue, itself an implication of the fact that not all eligible co collateral was used as collateral, implies that the safe short-term interest rate is pegged at the tax rate on note circulation. Since evidence on short- term interest rates is inconsistent with such a peg, that view must be rejected.
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- Kuehlwein, Michael, 1992. "The National Bank Note Controversy Reexamined," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(1), pages 111-126, February.
- James, John A, 1976. "The Conundrum of the Low Issue of National Bank Notes," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 359-367, April.