Central Banking without Romance

34 Pages Posted: 12 Dec 2014 Last revised: 26 Aug 2016

Robin Aguiar-Hicks

Troy University

Thomas L. Hogan

Rice University - Baker Institute for Public Policy

Daniel J. Smith

Sorrell College of Business, Troy University

Date Written: August 25, 2015


Many economists, including former Fed chairman Ben Bernanke, believe that the gold standard generates poor economic outcomes including output volatility, price instability, financial panics, the spread of recessions via the exchange rate, and speculation-induced collapse. These problems, however, do not by themselves demonstrate the superiority of central banks over the gold standard. Comparative institutional analysis requires demonstrating that the relevant alternative, in this case a central bank, can improve upon these outcomes in practice. We use this standard to compare central banking and the gold standard in the United States. Recent theoretical and empirical evidence suggests that the Fed has not been able to measurably improve upon the gold standard even when it comes to these deficiencies.

Keywords: Ben Bernanke; Comparative Economics; Federal Reserve; Gold standard; Public Choice; Stability

JEL Classification: E31, E32, E42, E58, N10

Suggested Citation

Aguiar-Hicks, Robin and Hogan, Thomas L. and Smith, Daniel J., Central Banking without Romance (August 25, 2015). Available at SSRN: https://ssrn.com/abstract=2536431 or http://dx.doi.org/10.2139/ssrn.2536431

Robin Aguiar-Hicks

Troy University ( email )

Troy, AL
United States

Thomas L. Hogan (Contact Author)

Rice University - Baker Institute for Public Policy ( email )

6100 Main Street, MS-40
Houston, TX 77005
United States

Daniel J. Smith

Sorrell College of Business, Troy University ( email )

137 Bibb Graves Hall
Troy, AL 36082
United States

HOME PAGE: http://www.danieljosephsmith.com/

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