Non-Legal-Tender Paper Money: The Structure and Performance of Maryland's Bills of Credit, 1767-1775
Maryland's non-legal-tender paper money emissions between 1765 and 1775 are reconstructed to determine the quantities outstanding and their redemption dates, providing a substantial correction to the literature. Over 80 percent of this paper money's current market value was expected real asset present value and under 20 percent was liquidity premium. It was primarily a real barter asset and not a fiat currency. The liquidity premium was positively related to the amount of paper money per capita in circulation. This paper money traded below face value only due to time-discounting and not depreciation. Past scholars have simply confused time-discounting with depreciation.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
James Celia and Farley Grubb, "Non-Legal-Tender Paper Money: The Structure and Performance of Maryland's Bills of Credit, 1767-75," ECONOMIC HISTORY REVIEW, 69, no. 4, (Nov. 2016), pp. 1132-1156.