Seigniorage in the Civil War South

39 Pages Posted: 22 Mar 2018 Last revised: 15 Jul 2018

Bryan Cutsinger

George Mason University, Department of Economics

Joshua Ingber

George Mason University, Department of Economics; Government of the United States of America - Bureau of Economic Analysis (BEA)

Date Written: March 15, 2018

Abstract

During the U.S. Civil War, the Confederate Congress adopted three currency reforms that reduced the quantity of Treasury notes in circulation by inducing the money-holding public to exchange their notes for long-term bonds and by taxation and repudiation of the notes themselves. Treating these currency reforms as event studies, we evaluate their effect on Confederate seigniorage using a model of inflationary finance. We find that the that the reforms reduced seigniorage revenue, which suggest that the South failed to maximize the revenue from seigniorage. This finding suggests that the South may have prolonged the war with a different monetary policy. We argue that this failure was caused by the bifurcation of the Confederate Congress into two groups – those that represented the Confederacy’s interior and those that represented areas that were no longer under Confederate control, which is confirmed by our empirical analysis.

Keywords: U.S. Civil War, Seigniorage, Confederacy, Inflationary Finance

JEL Classification: E31, E41, E65, N11, N41

Suggested Citation

Cutsinger, Bryan and Ingber, Joshua, Seigniorage in the Civil War South (March 15, 2018). Available at SSRN: https://ssrn.com/abstract=3141272 or http://dx.doi.org/10.2139/ssrn.3141272

Bryan Cutsinger (Contact Author)

George Mason University, Department of Economics ( email )

Fairfax, VA
United States

HOME PAGE: http://www.bryancutsinger.com

Joshua Ingber

George Mason University, Department of Economics ( email )

Fairfax, VA
United States

Government of the United States of America - Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

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