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Money, Inflation, and Output under Fiat and Commodity Standards

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  • Rolnick, Arthur J
  • Weber, Warren E

Abstract

The authors examine the behavior of money, inflation, and output under fiat and commodity standards to better understand how changes in monetary policy affect economic activity. Using long-term historical data for fifteen countries, the authors find that, under fiat standards, the growth rates of various monetary aggregates are more highly correlated with inflation and with each other than under commodity standards. Money growth, inflation, and output growth are also higher. In contrast, the authors do not find that money growth is more highly correlated with output growth under one standard than under the other. Copyright 1997 by the University of Chicago.

Suggested Citation

  • Rolnick, Arthur J & Weber, Warren E, 1997. "Money, Inflation, and Output under Fiat and Commodity Standards," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1308-1321, December.
  • Handle: RePEc:ucp:jpolec:v:105:y:1997:i:6:p:1308-21
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    References listed on IDEAS

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    1. Lucas, Robert E, Jr, 1996. "Nobel Lecture: Monetary Neutrality," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 661-682, August.
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    3. Backus, David K & Kehoe, Patrick J, 1992. "International Evidence of the Historical Properties of Business Cycles," American Economic Review, American Economic Association, vol. 82(4), pages 864-888, September.
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    5. James Tobin, 1963. "Commercial Banks as Creators of 'Money'," Cowles Foundation Discussion Papers 159, Cowles Foundation for Research in Economics, Yale University.
    6. Smith, Bruce D, 1985. "Some Colonial Evidence on Two Theories of Money: Maryland and the Carolinas," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1178-1211, December.
    7. Sargent, Thomas J. & Wallace, Meil, 1983. "A model of commodity money," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 163-187.
    8. Bordo Michael D. & Kydland Finn E., 1995. "The Gold Standard As a Rule: An Essay in Exploration," Explorations in Economic History, Elsevier, vol. 32(4), pages 423-464, October.
    9. George T. McCandless & Warren E. Weber, 1995. "Some monetary facts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
    10. Gerald P. Dwyer & R. W. Hafer, 1988. "Is money irrelevant?," Review, Federal Reserve Bank of St. Louis, issue May, pages 3-17.
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