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Gibson's Paradox and the Gold Standard

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  • Barsky, Robert B
  • Summers, Lawrence H

Abstract

This paper contributes a new element to the explanations of the Gibson paradox, the puzzling correlation between interest rates and the price level seen during the gold-standard peri od. A shock that raises the underlying real rate of return in the eco nomy reduces the equilibrium relative price of gold and, with the nom inal price of gold pegged by the authorities, must raise the price le vel. The mechanism involves the allocation of gold between monetary a nd nonmonetary uses. The authors' explanation helps to resolve some i mportant anomalies in previous work and is supported by empirical evi dence along a number of dimensions. Copyright 1988 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 96 (1988)
Issue (Month): 3 (June)
Pages: 528-50
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Handle: RePEc:ucp:jpolec:v:96:y:1988:i:3:p:528-50

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Levhari, David & Pindyck, Robert S, 1981. "The Pricing of Durable Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 96(3), pages 365-77, August.
  2. Sargent, Thomas J, 1973. "Interest Rates and Prices in the Long Run: A Study of the Gibson Paradox," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 385-449, Part II F.
  3. Michael D. Bordo, 1981. "The classical gold standard: some lessons for today," Review, Federal Reserve Bank of St. Louis, issue May, pages 2-17.
  4. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  5. Barro, Robert J, 1979. "Money and the Price Level under the Gold Standard," Economic Journal, Royal Economic Society, vol. 89(353), pages 13-33, March.
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Cited by:
  1. Robert J. Barro, 1986. "Government Spending, Interest Rates, Prices, and Budget Deficits in the United Kingdom, 1701-1918," NBER Working Papers 2005, National Bureau of Economic Research, Inc.
  2. Barsky, Robert B & De Long, J Bradford, 1993. "Why Does the Stock Market Fluctuate?," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 291-311, May.
  3. Jeffrey A. Frankel, 2006. "The Effect of Monetary Policy on Real Commodity Prices," NBER Working Papers 12713, National Bureau of Economic Research, Inc.
  4. Michael D. Bordo & Finn E. Kydland, 1992. "The gold standard as a rule," Working Paper 9205, Federal Reserve Bank of Cleveland.
  5. Barsky, Robert B & De Long, J Bradford, 1991. "Forecasting Pre-World War I Inflation: The Fisher Effect and the Gold Standard," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 815-36, August.
  6. Buiter, Willem H, 1986. "A Gold Standard Isn't Viable Unless Supported by Sufficiently Flexible Monetary and Fiscal Policy," CEPR Discussion Papers 125, C.E.P.R. Discussion Papers.
  7. Christophe Faugere & Julian Van Erlach, 2004. "The Price of Gold: A Global Required Yield Theory," Finance 0403003, EconWPA.
  8. Fernando Barran & Virginie Coudert & Benoit Mojon, 1995. "Interest Rates, Banking Spreads and Credit Supply : The Real Effects," Working Papers 1995-01, CEPII research center.
  9. Froot, Kenneth A & Klemperer, Paul D, 1989. "Exchange Rate Pass-Through When Market Share Matters," American Economic Review, American Economic Association, vol. 79(4), pages 637-54, September.
  10. Halicioglu, Ferda, 2004. "The Gibson Paradox: An Empirical Investigation for Turkey," MPRA Paper 3556, University Library of Munich, Germany.
  11. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
  12. Robert B. Barsky, 1986. "The Fisher Hypothesis and the Forecastability and Persistence of Inflation," NBER Working Papers 1927, National Bureau of Economic Research, Inc.
  13. Coulombe, Serge, 1998. "A Non-Paradoxical Interpretation of the Gibson Paradox," Working Papers 98-22, Bank of Canada.
  14. Robert B. Barsky & J. Bradford De Long, 1988. "Forecasting Pre-World War I Inflation: The Fisher Effect Revisited," NBER Working Papers 2784, National Bureau of Economic Research, Inc.
  15. Paul Evans & Xiaojun Wang, 2005. "A Tale of Two Effects," Working Papers 200506, University of Hawaii at Manoa, Department of Economics.

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