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The Suspension of Cash Payments as a Monetary Regime

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  • Elisa Newby

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Abstract

By setting bounds on money growth, the commodity standard is a solution to the monetary authority’s time inconsistency problem, which arises from the fixed wage structure of the economy. If there is a supply shock to the backing commodity, the suspension of the commodity standard may be desirable in terms of stabilisation of production and consumption. By representing a credible commitment to return to the commodity standard, the suspension of cash payments maintains the value and circulation of money. Lessons and evidence are taken from England’s experience of the suspension of cash payments between 1797 and 1821.

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Bibliographic Info

Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 200707.

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Date of creation: 15 Feb 2007
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Handle: RePEc:san:cdmawp:0707

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Keywords: Gold standard; Suspension of Cash Payments; Monetary policy; Monetary regimes.;

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References

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Cited by:
  1. Elisa Newby, 2007. "Macroeconomic Implications of Gold Reserve Policy of the Bank of England during the Eighteenth Century," CDMA Working Paper Series, Centre for Dynamic Macroeconomic Analysis 200708, Centre for Dynamic Macroeconomic Analysis.

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