TY  - JOUR
AU  - Rousseau, Peter L
TI  - Monetary Policy and the Dollar
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14993
PY  - 2009
Y2  - May 2009
DO  - 10.3386/w14993
UR  - http://www.nber.org/papers/w14993
L1  - http://www.nber.org/papers/w14993.pdf
N1  - Author contact info:
Peter L. Rousseau
Vanderbilt University
Department of Economics
Box 1819, Station B
Nashville, TN 37235
Tel: 615/343-2466
Fax: 615/343-8425
E-Mail: peter.l.rousseau@vanderbilt.edu
M1  - published as Peter L. Rousseau. "Monetary Policy and the Dollar," in Douglas A. Irwin and Richard Sylla, editors, "Founding Choices: American Economic Policy in the 1790s" University of Chicago Press (2011)

AB  - 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.
ER  -