Working Paper: NBER ID: w1722
Authors: Stanley Fischer
Abstract: The paper sets out a simple monetary model anduses it to compare alternative monetary systems. Money may be either fiat or gold. Both gold supply and velocity are uncertain. Asset demands are derived from expected utility maximization. I demonstrate the basic argument against a commodity money -- that it wastes resources, show why the optimal growth rate of money may be zero, and compare the behavior of the economy under constant money stock, constant price level, and constant gold price rules. Expected utilityis typically highest under the constant price level rule.
Keywords: Monetary Policy; Commodity Money; Expected Utility
JEL Codes: E52; E31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| commodity money (E42) | economic efficiency (D61) |
| growth rate of money (O42) | economic performance (P17) |
| monetary rule (E42) | expected utility (D81) |