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America's first monetary policy: inflation and seigniorage during the Revolutionary War

Published online by Cambridge University Press:  06 October 2008

Ben Baack
Ben Baack
Affiliation:
Ohio State Universitybaack.1@osu.edu
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Abstract

This examination of America's original monetary policy as implemented by the Continental Congress during the Revolutionary War finds that the extreme inflation experienced during the war resulted from a policy designed to circumvent a free-rider problem institutionalised by the Articles of Confederation, and that war news played a critical role in the behaviour of the money base over time. Furthermore, despite the extreme inflation, the inflation tax that accrued to Congress remained on the left side of the Laffer curve.

Résumés

Cet examen de la première politique monétaire de l'Amérique, telle qu'appliquée par le congrès continental pendant la guerre révolutionnaire, trouve que l'inflation extrême connue pendant la guerre était le résultat d'une politique destinée à faire échouer un problème free-rider institutionnalisé par les Articles de la Confédération, et que les nouvelles de la guerre ont joué un rôle critique dans le comportement de la base d'argent au fil du temps. De plus, en dépit de l'inflation extrême, l'inflation fiscale qui s'est accumulée au Congrès est restée du côté gauche de la courbe de Laffer.

Abstrakte

Diese Untersuchung der ersten amerikanischen Währungspolitik, die vom Kontinentalkongress während des Amerikanischen Unabhängigkeitskrieges implementiert wurde, kommt zu dem Schluss, dass die extreme während des Krieges herrschende Inflation das Ergebnis einer Politik war, die darauf abzielte ein Free-Rider-Problem zu umgehen, das durch die Konföderationsartikel institutionalisiert worden war, und dass Kriegsnachrichten das Verhalten der Geldbasis mit der Zeit entscheidend beeinflussten. Des Weiteren blieb die Inflationssteuer, die dem Kongress zufiel – trotz der extremen Inflation – auf der linken Seite der Laffer-Kurve.

Resúmenes

Al examinar la política monetaria inicial de América, implementada por el Congreso Continental durante la guerra de la Independencia, concluimos que la extrema inflación experimentada durante la guerra fue el resultado de una política diseñada para sortear el problema del polizón institucionalizado por los Artículos de Confederación; y que las noticias de la guerra desempeñaron un papel crítico en el comportamiento de la base monetaria. Además, a pesar de la extrema inflación, la tasa de inflación acumulada al Congreso permanecía en la parte izquierda de la curva Laffer.

Type
Articles
Information
Financial History Review , Volume 15 , Issue 2 , October 2008 , pp. 107 - 121
Copyright
Copyright © European Association for Banking and Financial History e.V. 2008

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References

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