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The gold standard as a rule

  • Michael D. Bordo
  • Finn E. Kydland

In this paper, we show that the monetary rule followed by a number of key countries before 1914 represented a commitment technology preventing the monetary authorities from changing planned future policy. The experiences of these major countries suggest that the gold standard was intended as a contingent rule. By that, we mean that the authorities could temporarily abandon the fixed price of gold during a wartime emergency on the understanding that convertibility at the original price of gold would be restored when the emergency passed.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9205.

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Date of creation: 1992
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Handle: RePEc:fip:fedcwp:9205
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  1. Herschel I. Grossman, 1988. "The Political Economy of War Debts and Inflation," NBER Working Papers 2743, National Bureau of Economic Research, Inc.
  2. Michael D. Bordo & Finn E. Kydland, 1990. "The Gold Standard as a Rule," NBER Working Papers 3367, National Bureau of Economic Research, Inc.
  3. Marvin Goodfriend, 1988. "Central banking under the gold standard," Working Paper 88-05, Federal Reserve Bank of Richmond.
  4. Marvin Goodfriend, 1991. "Money, credit, banking, and payments system policy," Economic Review, Federal Reserve Bank of Richmond, issue Jan, pages 7-23.
  5. Friedman, Milton, 1990. "Bimetallism Revisited," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 85-104, Fall.
  6. V.V. Chari & Patrick J. Kehoe, 1989. "Sustainable plans and debt," Staff Report 125, Federal Reserve Bank of Minneapolis.
  7. Eichengreen, Barry, 1989. "The Gold Standard Since Alec Ford," Department of Economics, Working Paper Series qt91z49066, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  8. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
  9. Michael D. Bordo, 1981. "The classical gold standard: some lessons for today," Review, Federal Reserve Bank of St. Louis, issue May, pages 2-17.
  10. Garber, Peter M. & Grilli, Vittorio U., 1986. "The Belmont-Morgan Syndicate as an optimal investment banking contract," European Economic Review, Elsevier, vol. 30(3), pages 649-677, June.
  11. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  12. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
  13. Robert B. Barsky, 1986. "The Fisher Hypothesis and the Forecastability and Persistence of Inflation," NBER Working Papers 1927, National Bureau of Economic Research, Inc.
  14. Michael D. Bordo & Eugene N. White, 1990. "British and French Finance During the Napoleonic Wars," NBER Working Papers 3517, National Bureau of Economic Research, Inc.
  15. Allan Meltzer & Saranna Robinson, 1989. "Stability Under the Gold Standard in Practice," NBER Chapters, in: Money, History, and International Finance: Essays in Honor of Anna J. Schwartz, pages 163-202 National Bureau of Economic Research, Inc.
  16. Vittorio Grilli, 1989. "Managing Exchange Rate Crises: Evidence from the 1890's," NBER Working Papers 3068, National Bureau of Economic Research, Inc.
  17. Glassman, Debra & Redish, Angela, 1988. "Currency depreciation in early modern England and France," Explorations in Economic History, Elsevier, vol. 25(1), pages 75-97, January.
  18. Finn Kydland & Edward C. Prescott, 1980. "A Competitive Theory of Fluctuations and the Feasibility and Desirability of Stabilization Policy," NBER Chapters, in: Rational Expectations and Economic Policy, pages 169-198 National Bureau of Economic Research, Inc.
  19. Barsky, Robert B & Summers, Lawrence H, 1988. "Gibson's Paradox and the Gold Standard," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 528-50, June.
  20. Bordo, Michael D., 1986. "Money, deflation and seigniorage in the fifteenth century: A review essay," Journal of Monetary Economics, Elsevier, vol. 18(3), pages 337-346, November.
  21. Roll, Richard, 1972. "Interest Rates and Price Expectations During the Civil War," The Journal of Economic History, Cambridge University Press, vol. 32(02), pages 476-498, June.
  22. Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August.
  23. Grossman, Herschel I & Van Huyck, John B, 1988. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," American Economic Review, American Economic Association, vol. 78(5), pages 1088-97, December.
  24. Bordo, Michael D. & White, Eugene N., 1991. "A Tale of Two Currencies: British and French Finance During the Napoleonic Wars," The Journal of Economic History, Cambridge University Press, vol. 51(02), pages 303-316, June.
  25. Prescott, Edward C., 1977. "Should control theory be used for economic stabilization?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 7(1), pages 13-38, January.
  26. Michael D. Bordo, 1993. "The Bretton Woods International Monetary System: A Historical Overview," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 3-108 National Bureau of Economic Research, Inc.
  27. Garber, Peter M, 1986. "Nominal Contracts in a Bimetallic Standard," American Economic Review, American Economic Association, vol. 76(5), pages 1012-30, December.
  28. Barry Eichengreen, 1987. "Hegemonic Stability Theories of the International Monetary System," NBER Working Papers 2193, National Bureau of Economic Research, Inc.
  29. Officer, Lawrence H., 1983. "Dollar-Sterling Mint Parity and Exchange Rates, 1791–1834," The Journal of Economic History, Cambridge University Press, vol. 43(03), pages 579-616, September.
  30. Kydland, Finn E. & Prescott, Edward C., 1980. "Dynamic optimal taxation, rational expectations and optimal control," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 79-91, May.
  31. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  32. Calomiris, Charles W, 1994. "Price and Exchange Rate Determination during the Greenback Suspension," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 344, April.
  33. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  34. Fumio Hayashi, 1989. "Japan's Saving Rate: New Data and Reflections," NBER Working Papers 3205, National Bureau of Economic Research, Inc.
  35. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  36. Harold L. Cole & Patrick J. Kehoe, 1991. "Reputation with multiple relationships: reviving reputation models of debt," Staff Report 137, Federal Reserve Bank of Minneapolis.
  37. Giovannini, Alberto, 1986. "`Rules of the game' during the International Gold Standard: England and Germany," Journal of International Money and Finance, Elsevier, vol. 5(4), pages 467-483, December.
  38. Murphy, Antoin E., 1987. "Richard Cantillon: Entrepreneur and Economist," OUP Catalogue, Oxford University Press, number 9780198285359, March.
  39. Cukierman, Alex, 1988. "Rapid inflation -- deliberate policy or miscalculation?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 11-75.
  40. Neal, Larry, 1991. "A Tale of Two Revolutions: International Capital Flows 1789-1819," Bulletin of Economic Research, Wiley Blackwell, vol. 43(1), pages 57-92, January.
  41. Friedman, Milton, 1990. "The Crime of 1873," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1159-94, December.
  42. Redish, Angela, 1990. "The Evolution of the Gold Standard in England," The Journal of Economic History, Cambridge University Press, vol. 50(04), pages 789-805, December.
  43. V.V. Chari, 1988. "Time consistency and optimal policy design," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 17-31.
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