Inflation and Regulation of Government Debt: US Historical Evidence

Jonathan Payne () and Bálint Szőke
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Jonathan Payne: Department of Economics, Princeton University, Princeton, New Jersey, USA
Bálint Szőke: Division of Monetary Affairs, Federal Reserve Board, Washington, DC, USA

Annual Review of Financial Economics, 2025, vol. 17, issue 1, 151-172

Abstract: Governments have often used two policy instruments to lower financing costs: the money supply to generate seigniorage and regulation of the financial system to increase demand for their interest-bearing bonds. Both involve trade-offs. This article marshals historical evidence and economic theories about how the US federal government has arranged monetary, financial, and fiscal systems since 1800 to lower its financing costs. In doing so, we infer evolving priorities of different US administrations.

Keywords: seigniorage; gold standard; government debt capacity; financial regulation; convenience yields (search for similar items in EconPapers)
JEL-codes: E31 E43 G12 N21 N41 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1146/annurev-financial-112823-015810

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