The Continental Dollar: Initial Design, Ideal Performance, and the Credibility of Congressional Commitment

Farley Grubb

No 17276, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: An alternative history of the Continental dollar is constructed from original sources and tested against evidence on prices and exchange rates. The Continental dollar was a zero-interest bearer bond, not a pure fiat currency. The public was promised redemption at face value in specie at fixed future dates. When time-discounting (rational bond pricing) is separated from depreciation, little depreciation occurred before 1779. In 1779, and again in 1780, Congress passed ex post facto laws altering Continental-dollar maturity dates. Because these new dates were not fiscally feasible, Congress' commitment to the Continental dollar lost credibility. Depreciation and collapse followed shortly thereafter.

JEL-codes: E42 E52 G12 G18 H11 H56 H6 H71 N11 N21 N41 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-his and nep-mon
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Published as Farley Grubb, The Continental Dollar: How the American Revolution was Financed with Paper Money (Chicago: University of Chicago Press, 2023).

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Working Paper: The Continental Dollar: Initial Design, Ideal Performance, and the Credibility of Congressional Commitment (2011)
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