The Suspension of the Gold Standard as Sustainable Monetary Policy

Elisa Newby

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: This paper models the gold standard as a state contingent commitment rule that is only feasible during peace. It shows that monetary policy during war, when the gold convertibility rule is suspended, can still be credible, if the policy maker's plan is to resume the gold standard at the old par value 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 rule and made monetrary policy time consistent. The equilibrium is supported by trigger strategies, where private agents retaliate if a policy maker defaults its policy plan to resume the gold standard rule.

Keywords: Gold standard; Time consistency; Monetary policy; Monetary regimes. (search for similar items in EconPapers)
JEL-codes: C61 E31 E4 E5 N13 (search for similar items in EconPapers)
Date: 2008-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The suspension of the gold standard as sustainable monetary policy (2012)
Working Paper: The Suspension of the Gold Standard as Sustainable Monetary Policy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0856

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