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The gold standard as a rule

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  • Michael D. Bordo
  • Finn E. Kydland

Abstract

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.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9205.

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Date of creation: 1992
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Handle: RePEc:fip:fedcwp:9205

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Keywords: Gold standard ; Economic history ; Monetary policy;

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References

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  2. Michael D. Bordo, 1993. "The Bretton Woods International Monetary System: A Historical Overview," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 3-108 National Bureau of Economic Research, Inc.
  3. Michael D. Bordo & Eugene N. White, 1991. "British and French Finance During the Napoleonic Wars," NBER Working Papers 3517, National Bureau of Economic Research, Inc.
  4. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
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  6. Michael D. Bordo & Finn E. Kydland, 1992. "The gold standard as a rule," Working Paper 9205, Federal Reserve Bank of Cleveland.
  7. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
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  9. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  10. Redish, Angela, 1990. "The Evolution of the Gold Standard in England," The Journal of Economic History, Cambridge University Press, vol. 50(04), pages 789-805, December.
  11. Calomiris, Charles W, 1988. "Price and Exchange Rate Determination during the Greenback Suspension," Oxford Economic Papers, Oxford University Press, vol. 40(4), pages 719-50, December.
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  21. Bordo, Michael D., 1986. "Money, deflation and seigniorage in the fifteenth century: A review essay," Journal of Monetary Economics, Elsevier, vol. 18(3), pages 337-346, November.
  22. Kydland, Finn E. & Prescott, Edward C., 1980. "Dynamic optimal taxation, rational expectations and optimal control," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 79-91, May.
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  24. Goodfriend, Marvin, 1988. "Central banking under the gold standard," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 85-124, January.
  25. Finn Kydland & Edward C. Prescott, 1980. "A Competitive Theory of Fluctuations and the Feasibility and Desirability of Stabilization Policy," NBER Chapters, in: Rational Expectations and Economic Policy, pages 169-198 National Bureau of Economic Research, Inc.
  26. Glassman, Debra & Redish, Angela, 1988. "Currency depreciation in early modern England and France," Explorations in Economic History, Elsevier, vol. 25(1), pages 75-97, January.
  27. V.V. Chari, 1988. "Time consistency and optimal policy design," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 17-31.
  28. Prescott, Edward C., 1977. "Should control theory be used for economic stabilization?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 7(1), pages 13-38, January.
  29. Allan Meltzer & Saranna Robinson, 1989. "Stability Under the Gold Standard in Practice," NBER Chapters, in: Money, History, and International Finance: Essays in Honor of Anna J. Schwartz, pages 163-202 National Bureau of Economic Research, Inc.
  30. Officer, Lawrence H., 1983. "Dollar-Sterling Mint Parity and Exchange Rates, 1791–1834," The Journal of Economic History, Cambridge University Press, vol. 43(03), pages 579-616, September.
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  32. Giovannini, Alberto, 1986. "`Rules of the game' during the International Gold Standard: England and Germany," Journal of International Money and Finance, Elsevier, vol. 5(4), pages 467-483, December.
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  36. Garber, Peter M. & Grilli, Vittorio U., 1986. "The Belmont-Morgan Syndicate as an optimal investment banking contract," European Economic Review, Elsevier, vol. 30(3), pages 649-677, June.
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  38. Herschel I. Grossman, 1988. "The Political Economy of War Debts and Inflation," NBER Working Papers 2743, National Bureau of Economic Research, Inc.
  39. Vittorio Grilli, 1989. "Managing Exchange Rate Crises: Evidence from the 1890's," NBER Working Papers 3068, National Bureau of Economic Research, Inc.
  40. Michael D. Bordo, 1981. "The classical gold standard: some lessons for today," Review, Federal Reserve Bank of St. Louis, issue May, pages 2-17.
  41. Roll, Richard, 1972. "Interest Rates and Price Expectations During the Civil War," The Journal of Economic History, Cambridge University Press, vol. 32(02), pages 476-498, June.
  42. Bordo, Michael D. & White, Eugene N., 1991. "A Tale of Two Currencies: British and French Finance During the Napoleonic Wars," The Journal of Economic History, Cambridge University Press, vol. 51(02), pages 303-316, June.
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