Working Paper: NBER ID: w14993
Authors: Peter L. Rousseau
Abstract: In this essay I propose that the adoption of the U.S. dollar as a common currency shortly after the ratification of the Federal Constitution and the accompanying transition from a fiat to specie standard was a pivotal moment in the nation's early history and marked an improvement over the monetary systems of colonial America and under the Articles of Confederation. This is because the dollar and all that came with it monetized the modern sector of the U.S. economy and tied the supply of money more closely to the capital market and the provision of credit -- feats that were not possible in an era when colonial legislatures were unable to credibly commit to controlling paper money emissions. The switch to a specie standard was at the time necessary to promote domestic and international confidence in the nascent financial system, and paved the way for the long transition to the point when the standard was no longer required.
Keywords: No keywords provided
JEL Codes: E42; E44; N11; N21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| The adoption of the US dollar as a common currency (F33) | Improvements in the monetary system (E42) |
| The transition from a fiat to a specie standard (E42) | Improvements in the monetary system (E42) |
| The transition from a fiat to a specie standard (E42) | Domestic and international confidence in the financial system (F65) |
| The adoption of the US dollar as a common currency (F33) | Stability of the monetary system (E42) |
| Improvements in the monetary system (E42) | Restoration of public confidence (H12) |