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Can Interest-Bearing Money Circulate? A Small-Denomination Arkansan Experiment, 1861–63
Article first published online: 30 JAN 2008
DOI: 10.1111/j.1538-4616.2008.00111.x
2008 The Ohio State University
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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
Publication History
- 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.
- Abstract
- Article
- References
- Cited By
Keywords:
- E42;
- N21
- 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.