Journal Article

Money and inflation in colonial Massachusetts

Abstract: This article argues that the quantity theory of money is not supported by the evidence. Contrary to the quantity theory, the article says, the value of money depends primarily on how carefully it is backed. That is, the rate of inflation depends more on underlying fiscal policies than on rates of money growth. The evidence for this argument comes from a close look at the way in which the colony of Massachusetts ended a severe long-term inflation in 1750. Other British North American colonies endured similar episodes, all of which parallel some periods of severe inflation in the 20th century United States. The 18th century evidence thus contains lessons for modern monetary policy. ; Reprinted in Quarterly Review, Fall 2002 (v. 26, no. 4)

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Quarterly Review

Publication Date: 1984

Volume: 8

Issue: Win