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Creator: Champ, Bruce, Wallace, Neil, and Weber, Warren E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 161 Abstract:
According to previous studies, the demand-liability feature of national bank notes did not present a problem for note-issuing banks because the nonbank public treated notes and other currency as perfect substitutes. However, that view, when combined with nonbindingness of the collateral restriction against note issue, itself an implication of the fact that some eligible collateral was not used for that purpose, implies that the safe short-term interest rate is pegged at the tax rate on note circulation. Since evidence on short-term interest rates is inconsistent with such a peg, that view must be rejected.
Palavra-chave: Bank notes, National banking system, and Interest rates Sujeito: N21 - Economic History: Financial Markets and Institutions: U.S.; Canada: Pre-1913 and E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems