Working Paper: NBER ID: w17123
Authors: Richard C.K. Burdekin; Kris James Mitchener; Marc D. Weidenmier
Abstract: The question of price level versus inflation targeting remains controversial. Disagreement concerns, not so much the desirability of price stability, but rather the means of achieving it. Irving Fisher argued for a commodity dollar standard where the purchasing power of money was fixed by indexing it to a basket of commodities. We show that movements in the price of silver closely track the movements in overall prices during the classical gold standard era. The one-to-one relationship between paper and silver bonds suggests that a simple "silver rule" could have sufficed to fix the purchasing power of money.
Keywords: price level targeting; inflation targeting; silver standard; Austrian economics; monetary policy
JEL Codes: E31; E4; E58; N1; N33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| silver prices (G13) | overall price levels (E30) |
| yields on silver bonds (G12) | yields on paper bonds (E43) |
| silver standard (E42) | price level stabilization (E64) |
| expected inflation for silver assets (E31) | expected inflation for paper assets (E31) |
| silver peg (E42) | inflation targeting (E31) |