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The Gold Standard, Bretton Woods and other Monetary Regimes: An Historical Appraisal

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  • Michael Bordo

Abstract

This paper provides answers to two questions. The first question is which international monetary regime is best for economic performance? One based on fixed exchange rates: including the gold standard and its variants? Adjustable peg regimes such as the Bretton Woods system and the European Monetary System? Or one based on floating exchange rates? The second question is why have some monetary regimes been more successful than others? Specifically. why did the classical gold standard last close to a century (at least for Great Britain) and why did Bretton Woods only endure for twenty-five years (or less)? Why was the European Monetary System successful for only a few years? To answer the first question I examine empirical evidence on the performance of three monetary regimes: the classical gold standard; Bretton Woods; and the current float; and as a backdrop the mixed regime interwar period. 1 answer the second question by linking regime success to the presence of credible commitment mechanisms, that is to the incentive compatibility features of the regime. Successful fixed rate regimes. in addition to being based on simple transparent rules. contained features which encouraged a center country to enforce the rules and other countries to comply.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4310.

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Date of creation: Oct 1993
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Handle: RePEc:nbr:nberwo:4310

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References

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  1. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  2. Marianne Baxter & Alan C. Stockman, 1990. "Business Cycles and the Exchange Rate System: Some International Evidence," NBER Working Papers 2689, National Bureau of Economic Research, Inc.
  3. Barsky, Robert B., 1987. "The Fisher hypothesis and the forecastability and persistence of inflation," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 3-24, January.
  4. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 377-400, May.
  5. Alogoskoufis, George S & Smith, Ron, 1991. "The Phillips Curve, the Persistence of Inflation, and the Lucas Critique: Evidence from Exchange-Rate Regimes," American Economic Review, American Economic Association, vol. 81(5), pages 1254-75, December.
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Cited by:
  1. Liliana Schumacher & Jiro Honda, 2006. "Adopting Full Dollarization in Postconflict Economies: Would the Gains Compensate for the Losses in Liberia?," IMF Working Papers 06/82, International Monetary Fund.
  2. Masson, Paul R. & Shukayev, Malik D., 2011. "Are bygones not bygones? Modeling price-level targeting with an escape clause and lessons from the gold standard," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 162-175, June.
  3. Caplan, B., 2002. "How does war shock the economy?," Journal of International Money and Finance, Elsevier, vol. 21(2), pages 145-162, April.
  4. Bordo, Michael D. & Jonung, Lars, 2000. "A Return to the Convertibility Principle? Monetary And Fiscal Regimes in Historical Perspective," Working Paper Series in Economics and Finance 415, Stockholm School of Economics.
  5. Terence C. Mills & Geoffrey E. Wood, 1993. "Does the exchange rate regime affect the economy?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 3-20.
  6. Luis A. V. Cat�o & Solomos N. Solomou, 2005. "Effective Exchange Rates and the Classical Gold Standard Adjustment," American Economic Review, American Economic Association, vol. 95(4), pages 1259-1275, September.
  7. António Portugal Duarte & João Sousa Andrade, 2004. "How the Gold Standard Functioned in Portugal: An Analysis of Some Macroeconomic Aspects," GEMF Working Papers 2004-01, GEMF - Faculdade de Economia, Universidade de Coimbra.
  8. Michael D. Bordo & Lars Jonung, 1996. "Monetary Regimes, Inflation And Monetary Reform: An Essay in Honor of Axel Leijonhufvud," Departmental Working Papers 199407, Rutgers University, Department of Economics.
  9. U. Michael Bergman & Michael D. Bordo & Lars Jonung, 1998. "Historical evidence on business cycles: the international experience," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 65-119.
  10. Michele Fratianni & Andreas Hauskrecht, 1998. "From the Gold Standard to a Bipolar Monetary System," Open Economies Review, Springer, vol. 9(1), pages 609-636, January.
  11. Michael D. Bordo & William G. Dewald, 2001. "Bond Market Inflation Expectations in Industrial Countries: Historical Comparisons," NBER Working Papers 8582, National Bureau of Economic Research, Inc.
  12. John Keating, 2004. "Interpreting Permanent and Transitory Shocks to Output When Aggregate Demand May Not Be Neutral in the Long-run," Econometric Society 2004 North American Summer Meetings 608, Econometric Society.
  13. Keating, John W., 2000. "Macroeconomic Modeling with Asymmetric Vector Autoregressions," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 1-28, January.
  14. Dibooglu, Selahattin, 1998. "The incidence and effects of macroeconomic disturbances under alternative exchange rate systems: evidence since the classical gold standard," International Review of Economics & Finance, Elsevier, vol. 7(2), pages 225-241.
  15. William Miles, 2003. "Fixed exchange rates and sticky prices in emerging markets," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(5), pages 575-586.
  16. George Furstenberg, 1998. "From Worldwide Capital Mobility to International Financial Integration: A Review Essay," Open Economies Review, Springer, vol. 9(1), pages 53-84, January.
  17. Michael D. Bordo & Angela Redish, 2003. "Is Deflation depressing? Evidence from the Classical Gold Standard," NBER Working Papers 9520, National Bureau of Economic Research, Inc.

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