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Monetary Rules and Commodity Schemes Under Uncertainty

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  • Stanley Fischer

Abstract

The paper sets out a simple monetary model anduses it to compare alternative monetary systems. Money may be either fiat or gold. Both gold supply and velocity are uncertain. Asset demands are derived from expected utility maximization. I demonstrate the basic argument against a commodity money -- that it wastes resources, show why the optimal growth rate of money may be zero, and compare the behavior of the economy under constant money stock, constant price level, and constant gold price rules. Expected utilityis typically highest under the constant price level rule.

Suggested Citation

  • Stanley Fischer, 1985. "Monetary Rules and Commodity Schemes Under Uncertainty," NBER Working Papers 1722, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1722
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    1. Fischer, Stanley, 1972. "Money, income, wealth, and welfare," Journal of Economic Theory, Elsevier, vol. 4(2), pages 289-311, April.
    2. Barro, Robert J, 1979. "Money and the Price Level under the Gold Standard," Economic Journal, Royal Economic Society, vol. 89(353), pages 13-33, March.
    3. Robert E. Hall, 1982. "Explorations in the Gold Standard and Related Policies for Stabilizing the Dollar," NBER Chapters, in: Inflation: Causes and Effects, pages 111-122, National Bureau of Economic Research, Inc.
    4. Robert E. Hall, 1982. "Inflation: Causes and Effects," NBER Books, National Bureau of Economic Research, Inc, number hall82-1, March.
    5. Nickelsburg, Gerald, 1985. "Monetary policy and commodity money equilibria," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 81-94, January.
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