No abstract

Forensic accounting is used to reconstruct the data on emissions, redemptions, and bills outstanding for colonial New Jersey paper money. These components are further separated into the amounts initially legislated, and the amounts actually executed. These data are substantial improvements over what currently exists in the literature. They also provide a more complete and nuanced accounting of colonial New Jersey's paper money regime than what has been done previously for any British North American colony. Enough detail of the forensic accounting exercise is given for scholars to reproduce the data series from the original sources.

The British North American colonies were the first western economies to rely on legislature-issued paper monies as an important internal media of exchange. This system arose piecemeal. In the absence of banks and treasuries that exchanged paper monies at face value for specie monies on demand, colonial governments experimented with other ways to anchor their paper monies to real values in the economy. These mechanisms included tax-redemption, land-backed loans, sinking funds, interest-bearing notes, and legal tender laws. The structure and performance of these mechanisms are explained and assessed. This was monetary experimentation on a grand scale.

The British North American colonies were the first western economies to rely on legislature-issued paper monies as an important internal media of exchange. This system arose piecemeal. In the absence of banks and treasuries that exchanged paper monies at face value for specie monies on demand, colonial governments experimented with other ways to anchor their paper monies to real values in the economy. These mechanisms included tax-redemption, land-backed loans, sinking funds, interest-bearing notes, and legal tender laws. The structure and performance of these mechanisms are explained and assessed. This was monetary experimentation on a grand scale. Farley Grubb Is Paper Money Just Paper Money? Experimentation and Variation in the Paper Monies Issued by the American Colonies from 1690 to 1775Farley Grubb* (4/11/15)The British North American colonies were the first western economies to rely on legislature-issued paper monies as an important internal media of exchange. This system arose piecemeal. In the absence of banks and treasuries that exchanged paper monies at face value for specie monies on demand, colonial governments experimented with other ways to anchor their paper monies to real values in the economy. These mechanisms included tax-redemption, land-backed loans, sinking funds, interest-bearing notes, and legal tender laws. The structure and performance of these mechanisms are explained and assessed. This was monetary experimentation on a grand scale.[ Explaining how colonial paper money regimes performed has proven controversial.These legislatureissued paper monies formed an important part of the circulating medium of exchange in many colonies (Brock 1975, Newman 2008. These colonial paper-money experiments were neither uniform nor coordinated across the colonies. They were instituted piecemeal-at different times with different motivations and goals. Their institutional structures and relative performances varied. While not consciously intended to be so, either by the colonies or the British government, this was monetary experimentation on a grand scale. 2Economists have found that the statistical relationships between the face-value quantities of paper monies in circulation, prices, and exchange rates are weak to non-existent in the colonies south of New England. These findings challenge the applicability of the classical quantity theory of money. Alternative hypotheses to account for these findings have been difficult to empirically test. These hypotheses include possible changes in the non-price components of the equation of exchange and potential currency substitutions between paper and specie monies. When empirical confirmation is lacking, hypotheses proliferate and views calcify. Heated debates over how to characterize colonial monetary behavior are the result. 4Economists have typically assumed that colonial paper monies were fiat currencies in fully monetized economies. They have largely ignored the extensive efforts to legislate the structure of money-something easy to ignore if monies...

for helpful comments. He also thanks Kelly Lynn Perkins, Nathan Richwine, and Zachary Rose for research assistance and Tracy McQueen for editorial assistance. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.