Gold, Fiat Money, and Price Stability
Michael Bordo (),
Dittmar Robert D () and
William Gavin ()
Additional contact information
Dittmar Robert D: Risk Analytics
The B.E. Journal of Macroeconomics, 2007, vol. 7, issue 1, 1-31
The classical gold standard has long been associated with long-run price stability. But short-run price variability led critics of the gold standard to propose reforms that look much like modern versions of price-path targeting. This paper uses a dynamic stochastic general equilibrium model to examine price dynamics under alternative policy regimes. In the model, a pure inflation target provides more short-run price stability than does the gold standard and, although it introduces a unit root into the price level, it leads to as much long-term price stability as does the gold standard for horizons shorter than 20 years. Relative to these regimes, Fisher's compensated dollar (or pure price-path targeting) reduces inflation uncertainty by an order of magnitude at all horizons. A Taylor rule, with its relatively large weight on output, leads to large uncertainty about inflation at long horizons. This long-run inflation uncertainty can be largely eliminated by introducing an additional response to the deviation of the price level from a desired path.
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
https://www.degruyter.com/view/j/bejm.2007.7.1/bej ... .1525.xml?format=INT (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
Working Paper: Gold, fiat money and price stability (2006)
Working Paper: Gold, Fiat Money, and Price Stability (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:7:y:2007:i:1:n:26
Ordering information: This journal article can be ordered from
Access Statistics for this article
The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti
More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().