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Belling the cat: Eli F. Heckscher on the gold standard as a discipline device

Unlike Knut Wicksell, Eli Heckscher did not believe the time had arrived for “managed money” to replace the gold standard after World War I. The war had shown that only a gold standard could bind the central bank to a time-consistent policy with reasonable price stability. Heckscher likened the problem of reinstating the gold standard to “Belling the cat” in Aesop’s fable. When the international gold standard crumbled in the Great Depression, he supported the Swedish price stabilization regime as a temporary system. Heckscher was an early discoverer of the time-consistency problem in monetary policy and hence stressed the importance of the institutional framework of monetary policy.

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Paper provided by Lund University, Department of Economics in its series Working Papers with number 2011:19.

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Length: 35 pages
Date of creation: 14 Jun 2011
Date of revision:
Publication status: Published as Fregert, Klas, 'Belling the cat: Eli F. Heckscher on the gold standard as a discipline device' in History of Political Economy, 2013, pages 39-59.
Handle: RePEc:hhs:lunewp:2011_019
Contact details of provider: Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
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  1. 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.
  2. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  3. Berg, Claes & Jonung, Lars, 1998. "Pioneering Price Level Targeting:The Swedish Experience 1931-1937," SSE/EFI Working Paper Series in Economics and Finance 290, Stockholm School of Economics.
  4. Carlson, Benny, 2009. "Who Was Most World-Famous – Cassel Or Keynes? The Economist As Yardstick," Journal of the History of Economic Thought, Cambridge University Press, vol. 31(04), pages 519-530, December.
  5. Elisa Newby, 2009. " The Suspension of the Gold Standard as Sustainable Monetary Policy," CDMA Conference Paper Series 0907, Centre for Dynamic Macroeconomic Analysis.
  6. Carl E. Walsh, 2002. "When should central bankers be fired?," Economics of Governance, Springer, vol. 3(1), pages 1-21, 03.
  7. 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.
  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. Mauro Boianovsky, 1998. "Wicksell on Deflation in the Early 1920s," History of Political Economy, Duke University Press, vol. 30(2), pages 219-275, Summer.
  10. Horn, Henrik & Persson, Torsten, 1988. "Exchange rate policy, wage formation and credibility," European Economic Review, Elsevier, vol. 32(8), pages 1621-1636, October.
  11. Taylor, John B., 1983. "`Rules, discretion and reputation in a model of monetary policy' by Robert J. Barro and David B. Gordon," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 123-125.
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