A new perspective on the Gold Standard: Inflation as a population phenomenon

Joao Faria and Peter McAdam ()

Journal of International Money and Finance, 2012, vol. 31, issue 6, 1358-1370

Abstract: The purpose of this paper is to contribute a new model of the Gold Standard, focusing on the interaction between resource scarcity and demographics. In a dynamic micro-founded model we find that: i) prices and equilibrium gold holdings increase with population (a scale effect), but decrease with the population growth rate; ii) that the Gold Standard implies deflation unless extraction resources outstrip population growth; and iii) there is no optimal quantity of money. The predictions of the model are examined using a structural VAR. Our results also shed light on debates about the viability of a return to the Gold Standard, and, more generally, on the interaction between policy variables and scarce resources.

Keywords: Gold Standard; Cagan-Keynes; Labor; Extraction; Scarcity; Inflation; Deflation; Population dynamics (search for similar items in EconPapers)
JEL-codes: E31 E41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:31:y:2012:i:6:p:1358-1370

DOI: 10.1016/j.jimonfin.2012.02.005

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