Was Economic Growth Likely in Lower Canada?
Accepted for publication in Journal of Private Enterprise
24 Pages Posted: 25 Aug 2016 Last revised: 7 Sep 2017
Date Written: August 23, 2016
Generally, the historical literature presents the period from 1817 to 1851 in Lower Canada (modern day Quebec) as one of negative economic growth. This period also coincides with the rise of free banking in the colony. We study the effects of free banking on economic growth using theoretical and empirical validations. Using the Equation of Exchange, we propose that given the increase in the stock of money and the reduction in the general price level, there must have been a positive rate of growth of income per capita during the period. Our theoretical discussion should conclusively end any debate over whether or not Lower Canada enjoyed a positive rate of economic growth. The only question remaining is why it was slower than that of the United States and the rest of Canada.
Keywords: Economic Growth, Free Banking, Price Level, Private Money
JEL Classification: N11, N21, E31
Suggested Citation: Suggested Citation