Accounting for Non-interest-Bearing Currency: A Critique of the Legal Restrictions Theory of Money

Lawrence White (lwhite11@gmu.edu)

Journal of Money, Credit and Banking, 1987, vol. 19, issue 4, 448-56

Abstract: The legal restrictions theory of money, developed by Neil Wallace and others, implies that all noncommodity currency would be interest bear ing under laissez faire (if the interest rate on bonds is positive). This note cites historical evidence to the contrary. It then analyzes the source of the legal restrictions theory's inapplicability, and o ffers an alternative computation-cost-based explanation for nonintere st-bearing currency. Copyright 1987 by Ohio State University Press.

Date: 1987
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Working Paper: Accounting for Non-Interest-Bearing Currency: A Critique of the ‘Legal Restrictions’ Theory of Money (1985)
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