A Model of the Gold Standard

Jesus Fernandez-Villaverde and Daniel Sanches

No 30457, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E42 E58 G21 (search for similar items in EconPapers)
Date: 2022-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-his, nep-mon and nep-pay
Note: EFG
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published as Jesús Fernández-Villaverde & Daniel Sanches, 2023. "A Model of the Gold Standard," Journal of Economic Theory, .

Downloads: (external link)
http://www.nber.org/papers/w30457.pdf (application/pdf)

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:nbr:nberwo:30457

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30457

Access Statistics for this paper

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