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    García-Palacios, Jaime H. Hasman, Augusto and Samartín, Margarita 2014. Banking crises and government intervention. Journal of Financial Stability, Vol. 15, p. 32.

    Honohan, P. and Yoder, S. 2011. Financial Transactions Tax: Panacea, Threat, or Damp Squib?. The World Bank Research Observer, Vol. 26, Issue. 1, p. 138.

    Fishback, P. 2010. US monetary and fiscal policy in the 1930s. Oxford Review of Economic Policy, Vol. 26, Issue. 3, p. 385.

    Albuquerque, Pedro H. 2006. BAD taxation: Disintermediation and illiquidity in a bank account debits tax model. International Tax and Public Finance, Vol. 13, Issue. 5, p. 601.


The Check Tax: Fiscal Folly and the Great Monetary Contraction

  • William D. Lastrapes (a1) and Grorge Selgin (a1)
  • DOI:
  • Published online: 01 March 2009

Although its role has been overlooked by monetary historians, a two-cent tax on bank checks effective from June 1932 through December 1934 appears to have been an important contributing factor to that period's severe monetary contraction. According to the estimates in this article, the currency–demand deposit ratio was about 15 percent higher, and the M1 money stock about 12 percent smaller, ceteris paribus, than each would have been without the tax. The contractionary consequences had in fact been anticipated by many legislators who were, nevertheless, unable to prevent the measure from being included in the Revenue Act of 1932.

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Michael D. Bordo , Ehsan U. Choudhri , and Anna J. Schwartz . “Could Stable Money have Averted the Great Contraction?Economic Inquiry 33, no. 3 (1995): 484505.

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Arthur F. Burns The Relative Importance of Check and Cash Payments in the United States, 1919–1928”. Journal of the American Statistical Association 24, no. 12 (1929): 420–24.

Stephen G. Cecchetti , and Georgios Karras . “Sources of Output Fluctuations During the Interwar Period: Further Evidence on the Causes of the Great Depression”. Review of Economics and Statistics 76, no. 1 (1994): 80102.

David Dickey , and Wayne A. Fuller . “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”. Econometrica 49, no. 4 (1981): 1057–72.

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Soren Johansen , and Katarina Juselius . “Maximum Likelihood Estimation and Inference on Cointegration—With Applications to the Demand for Money”. Oxford Bulletin of Economics and Statistics 52, no. 2 (1990): 169210.

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Bennett T. McCallum Could a Monetary Base Rule Have Prevented the Great Depression?Journal of Monetary Economics 26, no. 1 (1990): 326.

Pierre Perron . “Testing for a Unit Root in a Time Series with a Changing Mean”. Journal of Business and Economic Statistics 8, no. 2 (1990): 153–62.

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The Journal of Economic History
  • ISSN: 0022-0507
  • EISSN: 1471-6372
  • URL: /core/journals/journal-of-economic-history
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