The Gibson paradox: Evidence from China

Hao Cheng, Randall G. Kesselring and Christopher R. Brown

China Economic Review, 2013, vol. 27, issue C, 82-93

Abstract: Recent literature has advanced the view that the Gibson paradox, or the positive correlation of the price level with nominal interest rates, is nearly always a gold standard phenomenon. We argue that the Gibson correlation is more accurately classified as a statistical artifact of commodity money systems, with the gold standard merely representing one such system. Using new evidence from Chinese monetary history, this article gives evidence that the Gibson paradox appeared during China's silver-cored metallic standard era. Estimates obtained from recursive ordinary least squares specifications and vector auto-regressions performed, using the Shanghai Yinchai Rate and the Chinese Wholesale Price Index, confirm a Gibson correlation for China during the period 1873–1924.

Keywords: Gibson paradox; Commodity money; Gold standard; Recursive OLS; Vector autoregression (search for similar items in EconPapers)
JEL-codes: C20 E42 N10 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:27:y:2013:i:c:p:82-93

DOI: 10.1016/j.chieco.2013.08.001

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