Department of Economics
University of Delaware
Working Paper #2004-05
TESTING FOR THE ECONOMIC IMPACT OF THE U.S. CONSTITUTION:
PURCHASING POWER PARITY ACROSS SIX BRITISH COLONIES VERSUS ACROSS THE SAME SIX U.S. STATES, 1748-1811
For the six major British North American colonies, five of whom independently issued their own fiat paper money, exchange rates between these colonies are constructed and combined with price indices to test purchasing power parity between these colonies. Purchasing power parity is then tested between these same six locations after they became states united politically and monetarily under a common currency with no trade barriers established by the U.S. Constitution. Even when using short spans of data and low powered tests, purchasing power parity cannot be rejected in either period, and if anything, holds with more confidence prior to political and monetary unification.