Working Paper: CEPR ID: DP1248
Authors: Tamim Bayoumi; Barry Eichengreen
Abstract: This paper examines some popular explanations for the smooth operation of the pre-1914 gold standard. We find that the rapid adjustment of economies to underlying disturbances played an important role in stabilizing output and employment under the gold standard system, but no evidence that this success also reflected relatively small underlying disturbances. Finally, the paper also suggests an explanation for the evolution of the international monetary system based on growing nominal inertia over time.
Keywords: gold standard; international monetary system
JEL Codes: F33; N10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rapid adjustment of economies to disturbances (F32) | stabilizing output and employment under the gold standard (N13) |
| faster adjustment of prices and quantities during the gold standard (N13) | reflecting market flexibility (D43) |
| aggregate supply disturbances (E00) | responses of prices (E30) |
| shifts in aggregate demand and aggregate supply schedules over time (E00) | nominal inertia increased over time (E22) |