The Paper Money of Colonial North Carolina, 1712-1774
Beginning in 1712, North Carolina’s assembly emitted its own paper money and maintained some of its paper money in public circulation for the rest of the colonial period. This paper money has been reviled as an archetype of what was bad about the paper monies issued by American colonial legislatures. Yet little systematic analysis of North Carolina’s paper money has been undertaken. We correct that here. We reconstruct North Carolina’s paper money regime from original sources—providing yearly quantitative data on printings, net new emissions, redemptions and removals, amounts remaining in circulation, denominational structure, as well as the paper money’s current market value in pounds sterling. We identify different paper money regimes based on how the assembly structured and executed its paper money laws. We model and estimate how the market value of this money was determined. We compare the quantity theory of money with an asset-pricing model that treats the money as zero-coupon bonds to see which explains the observed market value of the paper money better. The asset-pricing model wins by a mile. Finally, we explore counterfactual redemption architectures to show how redemption affected monetary performance in periods of value collapse.
Cory Cutsail is a financial analyst at IMA Consulting. Farley Grubb is Professor and NBER Research Associate, Economics Department, University of Delaware, Newark, DE 19716. E-mail: firstname.lastname@example.org. Web-page: http://lerner.udel.edu/faculty-staff-directory/farley-grubb/. Send all correspondence to Farley Grubb. Editorial assistance from Tracy McQueen is gratefully acknowledged. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.