NBER

William Gavin

Federal Reserve Bank of St. Louis
Research Department
P.O. Box 442
St. Louis, MO 63166-0442

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Institutional Affiliation: Federal Reserve Bank of St. Louis

NBER Working Papers and Publications

December 2003Gold, Fiat Money, and Price Stability
with Michael D. Bordo, Robert D. Dittmar: w10171
Which monetary regime is associated with the most stable price level? A commodity money regime such as the classical gold standard has long been associated with long-run price stability. But critics of the day argued that the regime was associated with too much short-run price variability and argued for reforms that look much like modern versions of price-level targeting. In this paper, we develop a dynamic stochastic general equilibrium model that we use to examine price dynamics under four alternative regimes. They are the gold standard, Irving Fisher's compensated dollar proposal, and two regimes with paper money in which the central bank uses an interest rate rule to run monetary policy. In the first, the central bank uses an interest rate rule to target the price of gold. In the secon...

Published: Bordo, Michael D., Robert D. Dittmar, and William T. Gavin. "Gold, Fiat Money, and Price Stability." B.E. Journal of Macroeconomics: Topics in Macroeconomics 7, 1 (2007). citation courtesy of

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