Backing, the Quantity Theory, and the Transition to the U.S. Dollar, 1723-1850

Peter Rousseau

No 12835, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Among the thirteen original colonies, Pennsylvania was most successful at issuing paper money with only minimal effects on prices -- so much so that the colony's experience is sometimes seen as violating the classical quantity theory of money. Quantity theorists usually attribute this apparent anomaly to mismeasurement of the money stock. In contrast, I use data on money, prices, and real activity in Pennsylvania from 1723 to 1774 and for the United States as a whole from 1790 to 1850 (when the money stock is better measured) to show that the long-run behavior of money and prices is well explained by the quantity theory in both periods, despite the differences in institutional arrangements, once growth in monetized transactions is taken into account.

JEL-codes: E31 E42 N11 (search for similar items in EconPapers)
Date: 2007-01
New Economics Papers: this item is included in nep-his, nep-mac and nep-mon
Note: DAE ME
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Citations: View citations in EconPapers (9)

Published as 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.

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