A Model of the Gold Standard
Jesus Fernandez-Villaverde and
Daniel R. Sanches
No 22-33, Working Papers from Federal Reserve Bank of Philadelphia
Abstract:
The gold standard emerged as the international monetary system by the end of the 19th century. We formally study its properties in a micro-founded model and find that the scarcity of the world gold stock not only results in a suboptimal output of goods that are purchased with money but also subjects the domestic economy of a country to external shocks. The creation of inside money in the form of private credit instruments adds to the money supply, usually resulting in a Pareto improvement, but opens the door to the international transmission of banking crises. These properties of the gold standard can explain the limited adherence by peripheral countries because of the potential risks to their economies. We argue that the gold standard can be sustainable at the core but not at the periphery.
Keywords: gold standard; specie flows; non-neutrality of money; inside money (search for similar items in EconPapers)
JEL-codes: E42 E58 G21 (search for similar items in EconPapers)
Pages: 28
Date: 2022-09-21
New Economics Papers: this item is included in nep-dge, nep-his, nep-mac, nep-mon, nep-opm and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
https://www.philadelphiafed.org/-/media/frbp/asset ... ers/2022/wp22-33.pdf (text/html)
Related works:
Journal Article: A model of the gold standard (2023) 
Working Paper: A Model of the Gold Standard (2022) 
Working Paper: A Model of the Gold Standard (2022) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:94803
Ordering information: This working paper can be ordered from
DOI: 10.21799/frbp.wp.2022.33
Access Statistics for this paper
More papers in Working Papers from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().