How Good Was the Gold Standard?

Abstract

In this chapter, I compare the economic performance on the gold standard to that under central banking based on the growth and stability of prices and real production. I find that the Fed has not obviously outperformed the market-based gold standard. The price level was more predictable prior to the creation of the Fed, and the rate of inflation was lower. Real GDP growth was higher on the market-based gold standard, while the volatility of real GDP growth has been marginally lower under the post-war Fed. Financial markets were volatile prior to the creation of the Fed, but they have been even more volatile in the time since.

Keywords: Gold standard, Federal Reserve, Inflation, GDP growth, Financial stability

JEL Classification: E3, E5, N1