NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Colonial American Paper Money and the Quantity Theory of Money: An Extension

Farley Grubb

NBER Working Paper No. 22192
Issued in April 2016, Revised in November 2016
NBER Program(s):Development of the American Economy

The quantity theory of money is applied to the paper money regimes of seven of the nine British North American colonies south of New England. Individual colonies, and regional groupings of contiguous colonies treated as one monetary unit, are tested. Little to no statistical relationship, and little to no magnitude of influence, between the quantities of paper money in circulation and prices are found. The failure of the quantity theory of money to explain the value and performance of colonial paper money is a general and widespread result, and not an isolated and anomalous phenomenon.

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Document Object Identifier (DOI): 10.3386/w22192

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