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http://ssrn.com/abstract=851704
 
 

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Stuck on Gold: Real Exchange Rate Volatility and the Rise and Fall of the Gold Standard


Natalia Chernyshoff


affiliation not provided to SSRN

David S. Jacks


Simon Fraser University (SFU) - Department of Economics; National Bureau of Economic Research (NBER)

Alan M. Taylor


University of Virginia - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

November 2005

NBER Working Paper No. w11795

Abstract:     
Did adoption of the gold standard exacerbate or diminish macroeconomic volatility? Supporters thought so, critics thought not, and theory offers ambiguous messages. A hard exchange-rate regime such as the gold standard might limit monetary shocks if it ties the hands of policy makers. But any decision to forsake exchange-rate flexibility might compromise shock absorption in a world of real shocks and nominal stickiness. A simple model shows how a lack of flexibility can be discerned in the transmission of terms of trade shocks. Evidence on the relationship between real exchange rate volatility and terms of trade volatility from the late nineteenth and early twentieth century exposes a dramatic change. The classical gold standard did absorb shocks, but the interwar gold standard did not, and this historical pattern suggests that the interwar gold standard was a poor regime choice.

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Date posted: November 29, 2006  

Suggested Citation

Chernyshoff, Natalia and Jacks, David S. and Taylor, Alan M., Stuck on Gold: Real Exchange Rate Volatility and the Rise and Fall of the Gold Standard (November 2005). NBER Working Paper No. w11795. Available at SSRN: http://ssrn.com/abstract=851704

Contact Information

Natalia Chernyshoff
affiliation not provided to SSRN ( email )
No Address Available
David S. Jacks
Simon Fraser University (SFU) - Department of Economics ( email )
8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Alan M. Taylor (Contact Author)
University of Virginia (UVA) - Department of Economics ( email )
P.O. Box 400182
Charlottesville, VA 22904-4182
United States
(434)-924-3177 (Phone)
(434)-982-2904 (Fax)
HOME PAGE: http://people.virginia.edu/~amt7u
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://nber.org
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
HOME PAGE: http://cepr.org
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