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

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Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:hhs:lunewp:2011_019
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    File URL: http://project.nek.lu.se/publications/workpap/papers/WP11_19.pdf
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    1. Newby, Elisa, 2012. "The suspension of the gold standard as sustainable monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1498-1519.
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    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.
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    7. Berg, Claes & Jonung, Lars, 1999. "Pioneering price level targeting: The Swedish experience 1931-1937," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 525-551, June.
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    Keywords

    Heckscher; time-consistent policy; devaluation; deflation; gold standard;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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