The Gibson paradox: Evidence from China
AbstractRecent literature has advanced the view that the Gibson paradox, or the positive correlation of the price level with nominal interest rates, is nearly always a gold standard phenomenon. We argue that the Gibson correlation is more accurately classified as a statistical artifact of commodity money systems, with the gold standard merely representing one such system. Using new evidence from Chinese monetary history, this article gives evidence that the Gibson paradox appeared during China's silver-cored metallic standard era. Estimates obtained from recursive ordinary least squares specifications and vector auto-regressions performed, using the Shanghai Yinchai Rate and the Chinese Wholesale Price Index, confirm a Gibson correlation for China during the period 1873–1924.
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Bibliographic InfoArticle provided by Elsevier in its journal China Economic Review.
Volume (Year): 27 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/chieco
Gibson paradox; Commodity money; Gold standard; Recursive OLS; Vector autoregression;
Find related papers by JEL classification:
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
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