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Estimating a Cagan-type demand function for gold: 1561-1913

Author

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  • Neil Wallace

    (Pennsylvania State University)

  • Alexei Deviatov

    (New Economic School)

Abstract

Long times series on production of gold and the value of gold, taken from Jastram's book "The Golden Constant", are used to estimate a Cagan-type demand function that relates the real total value of gold to its expected rate of return. The model assumes that gold production and a latent scale variable (income or consumption) are jointly exogenous and that the data are measured with error. The data reject the model: the estimates imply that the real value of gold varies a great deal relative to the expected return and depends negatively, rather than positively, on the expected return.

Suggested Citation

  • Neil Wallace & Alexei Deviatov, 2007. "Estimating a Cagan-type demand function for gold: 1561-1913," 2007 Meeting Papers 345, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:345
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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