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The suspension of the gold standard as sustainable monetary policy

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  • Newby, Elisa

Abstract

This paper models the gold standard as a state contingent commitment technology that is only feasible during peace. Monetary policy during war, when the gold convertibility rule is suspended, can still be credible, if the policymaker's plan is to resume the gold standard in the future. The DSGE model developed in this paper suggests that the resumption of the gold standard was a sustainable plan, which replaced the gold standard as a commitment technology and made monetary policy time consistent. Trigger strategies support the equilibrium: private agents retaliate if a policymaker defaults on its plan to resume the gold standard.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 10 ()
Pages: 1498-1519

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Handle: RePEc:eee:dyncon:v:36:y:2012:i:10:p:1498-1519

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Time consistency; Monetary policy; Monetary regimes; Gold standard;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The gold standard as a commitment technology
    by Economic Logician in Economic Logic on 2009-12-16 03:45:00
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Cited by:
  1. Fregert, Klas, 2011. "Belling the cat: Eli F. Heckscher on the gold standard as a discipline device," Working Papers 2011:19, Lund University, Department of Economics.

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