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Working Paper
Gold, fiat money and price stability
The classical gold standard has long been associated with long-run price stability. But short-run price variability led critics of the gold standard to propose reforms that look much like modern versions of price-path targeting. This paper uses a dynamic stochastic general equilibrium model to examine price dynamics under alternative policy regimes. In the model, an inflation target provides more short-run price stability than does the gold standard and, although it introduces a unit root into the price level, it leads to as much long-term price stability as does the gold standard for horizons shorter than 30 years. Relative to these regimes, Fisher's compensated dollar reduces price level and inflation uncertainty by an order of magnitude at all horizons.> The classical gold standard has long been associated with long-run price stability. But short-run price variability led critics of the gold standard to propose reforms that look much like modern versions of price-path targeting. This paper uses a dynamic stochastic general equilibrium model to examine price dynamics under alternative policy regimes. In the model, an inflation target provides more short-run price stability than does the gold standard and, although it introduces a unit root into the price level, it leads to as much long-term price stability as does the gold standard for horizons shorter than 30 years. Relative to these regimes, Fisher's compensated dollar reduces price level and inflation uncertainty by an order of magnitude at all horizons.
AUTHORS: Bordo, Michael D.; Dittmar, Robert; Gavin, William T.
DATE: 2006
Discussion Paper
Real exchange rates under the gold standard
Purchasing power parity is one of the most important equilibrium conditions in international macroeconomics. Empirically, it is also one of the most hotly contested. Numerous recent studies, for example, have sought to determine the validity of purchasing power parity using data from the post-Bretton-Woods float and have reached different conclusions. We assert that most such studies are flawed for two reasons. First, the post-1973 data contain, by definition, only a very limited amount of the low-frequency information relevant for examination of long-run parity. Second, the dynamic econometric techniques used to model deviations from parity are typically quite crude with respect to the modeling of low-frequency dynamics. Both deficiencies are rectified in the present paper, with dramatic results. We construct a new dataset of sixteen real exchange rates covering more than a century of the classic gold standard period, and we study deviations from parity using long-memory models that allow for subtle forms of mean reversion. For each real exchange rate, we find that parity holds in the long run.
AUTHORS: Diebold, Francis X.; Husted, Steven; Rush, Mark
DATE: 1990
Journal Article
Deflation and real economic activity under the gold standard
AUTHORS: Neely, Christopher J.; Wood, Geoffrey E.
DATE: 1995-09
Journal Article
The monetary economics of gold
AUTHORS: Burger, Albert E.
DATE: 1974-01
Journal Article
The gold standard, Bretton Woods and other monetary regimes: a historical appraisal
AUTHORS: Bordo, Michael D.
DATE: 1993-03
Journal Article
The classical gold standard: some lessons for today
AUTHORS: Bordo, Michael D.
DATE: 1981-05
Working Paper
The gold standard as a rule
In this paper, we show that the monetary rule followed by a number of key countries before 1914 represented a commitment technology preventing the monetary authorities from changing planned future policy. The experiences of these major countries suggest that the gold standard was intended as a contingent rule. By that, we mean that the authorities could temporarily abandon the fixed price of gold during a wartime emergency on the understanding that convertibility at the original price of gold would be restored when the emergency passed.
AUTHORS: Kydland, Finn E.; Bordo, Michael D.
DATE: 1992
Journal Article
The international gold standard and U.S. monetary policy from World War I to the New Deal
AUTHORS: Crabbe, Leland
DATE: 1989-06
Journal Article
The changing role of gold in the International Monetary System
Special issue on gold
AUTHORS: Cheng, Hang-Sheng; Sargen, Nicholas
DATE: 1975-01
Journal Article
Gold policy: the thirties and the seventies
Special issue on gold
AUTHORS: Dew, Kurt
DATE: 1975-01