Stuck on Gold: Real Exchange Rate Volatility and the Rise and Fall of the Gold Standard

Natalia Chernyshoff, David S. Jacks () and Alan M. Taylor ()

No 11795, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Did adoption of the gold standard exacerbate or diminish macroeconomic volatility? Supporters thought so, critics thought not, and theory offers ambiguous messages. A hard exchange-rate regime such as the gold standard might limit monetary shocks if it ties the hands of policy makers. But any decision to forsake exchange-rate flexibility might compromise shock absorption in a world of real shocks and nominal stickiness. A simple model shows how a lack of flexibility can be discerned in the transmission of terms of trade shocks. Evidence on the relationship between real exchange rate volatility and terms of trade volatility from the late nineteenth and early twentieth century exposes a dramatic change. The classical gold standard did absorb shocks, but the interwar gold standard did not, and this historical pattern suggests that the interwar gold standard was a poor regime choice.

JEL-codes: F33 F41 N10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk, nep-his and nep-ifn
Date: 2005-11
Note: DAE IFM ITI
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w11795.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
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: http://EconPapers.repec.org/RePEc:nbr:nberwo:11795

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w11795
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().