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The Suspension of the Gold Standard as Sustainable Monetary Policy

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  • Elisa Newby

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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 suspended, can still be credible, if the policy maker’s plan is to resume the gold standard in the future. The DGE 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 policy maker defaults its plan to resume the gold standard.

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Bibliographic Info

Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Conference Paper Series with number 0907.

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Date of creation: Jun 2009
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Handle: RePEc:san:cdmacp:0907

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Keywords: Time Consistency; Monetary Policy; Monetary Regimes.;

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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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