A "Gold Standard" Isn't Viable Unless Supported by Sufficiently FlexibleMonetary and Fiscal Policy
The paper studies an idealized gold standard in a two-country setting. Without flexible national domestic credit expansion (dce)policies which offset the effect of money demand shocks on international gold reserves, the gold standard collapses with certainty in finite time through a speculative selling attack against one of the currencies.Various policies for postponing a collapse are considered. When a responsive dce policy eliminates the danger of a run on a country's reserves, the exogenous shocks disturbing the system which previously were reflected in reserve flows, now show up in the behaviour of the public debt. Unless the primary (non-interest) government deficit is permitted to respond to these shocks, the public debt is likely to rise (or fall) to unsustainable levels. For the idealized gold standard analysed in the paper, viability can be achieved only through the active and flexible use of monetary and fiscal policy.
|Date of creation:||Apr 1986|
|Date of revision:|
|Publication status:||published as Buiter, Willem. "A Viable Gold Standard Requires Flexible Monetary And Fiscal Policy," from Review of Economic Studies, Vol. 56, pp. 101-117, (1989).|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.orgEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maurice Obstfeld, 1984.
"Speculative Attack and the External Constraint in a Maximizing Model of the Balance of Payments,"
NBER Working Papers
1437, National Bureau of Economic Research, Inc.
- Maurice Obstfeld, 1986. "Speculative Attack and the External Constraint in a Maximizing Model of the Balance of Payments," Canadian Journal of Economics, Canadian Economics Association, vol. 19(1), pages 1-22, February.
- Obstfeld, Maurice, 1984.
"Balance-of-Payments Crises and Devaluation,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 16(2), pages 208-17, May.
- Robert P. Flood & Peter M. Garber, 1981.
"A Model of Stochastic Process Switching,"
NBER Working Papers
0626, National Bureau of Economic Research, Inc.
- Stephen W. Salant & Dale W. Henderson, 1976. "Market anticipations, government policy, and the price of gold," International Finance Discussion Papers 81, Board of Governors of the Federal Reserve System (U.S.).
- Willem H. Buiter, 1984.
"Saddlepoint Problems in Contifuous Time Rational Expectations Models: A General Method and Some Macroeconomic Ehamples,"
NBER Technical Working Papers
0020, National Bureau of Economic Research, Inc.
- Buiter, Willem H, 1984. "Saddlepoint Problems in Continuous Time Rational Expectations Models: A General Method and Some Macroeconomic Examples," Econometrica, Econometric Society, vol. 52(3), pages 665-80, May.
- Buiter, W, 1982. "Saddlepoint Problems in Continuous Time Rational Expectations Models : A General Method and Some Macroeconomic Examples," The Warwick Economics Research Paper Series (TWERPS) 200, University of Warwick, Department of Economics.
- Robert B. Barsky & Lawrence H. Summers, 1985.
"Gibson's Paradox and the Gold Standard,"
NBER Working Papers
1680, National Bureau of Economic Research, Inc.
- Grilli, Vittorio U., 1986. "Buying and selling attacks on fixed exchange rate systems," Journal of International Economics, Elsevier, vol. 20(1-2), pages 143-156, February.
- Salant, Stephen W & Henderson, Dale W, 1978. "Market Anticipations of Government Policies and the Price of Gold," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 627-48, August.
- Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1903. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.