THE U.S. EMBARGO ACT OF 1807: ITS IMPACT ON NEW ENGLAND MONEY, BANKING, AND ECONOMIC ACTIVITY

For half a century economists have debuted the impact of the Embargo Act of 1807 on the U.S. economy. Using New England bank statistics and the weekly prices of financial assets traded in the Boston market, hypotheses generated by a real business cycle model are tested. The study concludes that the embargo significantly fnfected the levels of real and nominal bunk loans, the real and nominal money stock, and current financial asset yields. Also, increased monetary und banking activity in Maine during the period supports the long‐standing hypothesis that the embargo caused an increase in smuggling activity.