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The Suspension of the Gold Standard as Sustainable Monetary Policy

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  • Elisa Newby

Abstract

This paper models the gold standard as a state contingent commitment technology that is only feasible during peace. Monetary policy during war, when the gold convertibility rule suspended, can still be credible, if the policy maker’s plan is to resume the gold standard in the future. The DGE model developed in this paper suggests that the resumption of the gold standard was a sustainable plan, which replaced the gold standard as a commitment technology and made monetary policy time consistent. Trigger strategies support the equilibrium: private agents retaliate if a policy maker defaults its plan to resume the gold standard.

Suggested Citation

  • Elisa Newby, 2009. "The Suspension of the Gold Standard as Sustainable Monetary Policy," CDMA Conference Paper Series 0907, Centre for Dynamic Macroeconomic Analysis.
    • Handle: RePEc:san:cdmacp:0907
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    File URL: https://www.st-andrews.ac.uk/CDMA/papers/cp0907.pdf
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    1. The gold standard as a commitment technology
      by Economic Logician in Economic Logic on 2009-12-16 09:45:00

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    Cited by:

    1. 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.

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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