The authors thank Michael Dougan, Greg Hess, Harold Mulherin, Gary Pecquet, Janet Smith, Jennifer Ward-Batts, Tom Willett, and an anonymous referee for helpful advice and comments and are grateful to the Reference Department of the University Library of the University of Arkansas at Fayetteville for most kindly supplying material from their archives.
Can Interest-Bearing Money Circulate? A Small-Denomination Arkansan Experiment, 1861–63
Article first published online: 30 JAN 2008
2008 The Ohio State University
Journal of Money, Credit and Banking
Volume 40, Issue 1, pages 233–241, February 2008
How to Cite
BURDEKIN, R. C. K. and WEIDENMIER, M. D. (2008), Can Interest-Bearing Money Circulate? A Small-Denomination Arkansan Experiment, 1861–63. Journal of Money, Credit and Banking, 40: 233–241. doi: 10.1111/j.1538-4616.2008.00111.x
- Issue published online: 30 JAN 2008
- Article first published online: 30 JAN 2008
- Received June 23, 2006; and accepted in revised form October 4, 2006.
- legal restrictions;
- interest-bearing currency;
- civil war
Legal restrictions theory suggests that dominance of non-interest-bearing currency is possible only because legal impediments prevent financial institutions from offering interest-bearing alternatives. A viable interest-bearing medium must be issued in denominations low enough for day-to-day use, however, and without historical examples of small-denomination interest-bearing issues we cannot properly test whether interest-bearing currency will circulate as legal restrictions theory predicts. Civil War Arkansas offers a rare instance where large quantities of small-denomination interest-bearing money were actually issued, mostly below $5. The results of this Arkansan experiment show that small-denomination interest-bearing issues can indeed function as the primary medium of exchange.