Monetary Famine, Paper Money, and International Constraints on Economic Growth: The Case of Colonial Quebec

30 Pages Posted: 20 May 2021

See all articles by Vincent Geloso

Vincent Geloso

George Mason University - Department of Economics

Gabriel Mathy

American University - Department of Economics

Date Written: May 17, 2021

Abstract

New France, like most European colonies in the New World, suffered from a persistent shortage of metal coins. As Quebec could only legally import from France, their standards of living were constrained by their ability to export a few primary products (mostly fur, cod, timber and wheat). Mercantilist restrictions and underdeveloped financial markets limited the ability to use the capital account to import coins and tightened the balance of payments constraint. The introduction of playing card money in New France in 1685, the first use of paper money in the West, provided a means of relaxing this constraint. It produced a substitute domestic money which allowed scarce metal coins to be used to purchase imports. The balance-of-payments constrained growth models that grew out of Thirlwall’s Law is applied to this experience, with discussions of the export constraints of Quebec’s reliance on a few primary exports (with furs being the most dominant one) with inelastic demand and facing the vagaries of changing tastes in Europe.

Keywords: Playing Card Money, Balance of Payments Constrained Growth, Colonial New France

JEL Classification: O42, N11, E51

Suggested Citation

Geloso, Vincent and Mathy, Gabriel, Monetary Famine, Paper Money, and International Constraints on Economic Growth: The Case of Colonial Quebec (May 17, 2021). Available at SSRN: https://ssrn.com/abstract=3848597 or http://dx.doi.org/10.2139/ssrn.3848597

Vincent Geloso (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

Gabriel Mathy

American University - Department of Economics ( email )

4400 Massachusetts Avenue, N.W.
Washington, DC 20016-8029
United States

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