James Madison's Monetary Economics
When he wrote "Money," Madison was a member of a Revolutionary government that was struggling to monetize a huge wartime deficit by issuing inconvertible paper money, and promising to establish a gold standard and redeem its paper currency in the future. If honored, as this (and Madison's) analysis assumes, such a promise would constitute a future "backing" of money issues that he expected to limit inflation and break its connection to the rate of money growth. The model presented in this article can give rise to equilibria that mimic general observations about what happens when governments follow these kinds of policies.
Suggested citation: Smith, Bruce D. “James Madison's Monetary Economics,” Federal Reserve Bank of Cleveland, Economic Review, vol. 34, no. 1, pp. 07-20, 01.01.1998.