A New Approach to Solving the Colonial Monetary Puzzle: Evidence from New Jersey, 1709-1775

Farley Grubb

No 19903, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The market value of colonial New Jersey's paper money is decomposed into its real asset present value and its liquidity premium. Its real asset present value accounted for over 80 percent, whereas its value as money per se accounted for under 20, percent of its market value. Colonial paper money was not a fiat currency. Its liquidity premium was driven by the quantity of paper money in circulation and the method of injection. The quantity theory of money performs poorly when using prices and exchange rates, but performs well when using real asset present values, to measure paper money's expected value.

JEL-codes: E31 E42 E51 N11 N21 N41 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mac and nep-mon
Note: DAE ME
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Citations: View citations in EconPapers (5)

Published as Farley Grubb, "Colonial New Jersey Paper Money, 1709-1775: Value Decomposition and Performance," Journal of Economic History, 76, no. 4 (Dec. 2016), pp. 1216-1232.

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