NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Farley Grubb

NBER Working Paper No. 17276
Issued in August 2011
NBER Program(s):   DAE

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.

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This paper was revised on February 27, 2013

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17276

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