How Does a Well-functioning Gold Standard Function?

14 Pages Posted: 8 Nov 2021

See all articles by Peter C Earle

Peter C Earle

affiliation not provided to SSRN

William J. Luther

Florida Atlantic University; American Institute for Economic Research

Date Written: August 15, 2021

Abstract

To understand the historical performance of the gold standard and the prospects for a future gold-backed money, one must have a firm understanding of how a well-functioning gold standard works. We focus on the endogenous supply of the gold standard. We describe a simple model that demonstrates how a gold standard tends to stabilize the purchasing power of money in the long run. Then, we discuss the historical performance of the gold standard to show how well our simple model holds up. We maintain that, with this model in mind, one can assess the extent to which real-world monetary systems approximate a well-functioning gold standard and evaluate the relative merits of monetary regimes more broadly.

Keywords: gold, gold standard, money, monetary economics, monetary regimes, monetary systems, political economy

JEL Classification: E42, E51

Suggested Citation

Earle, Peter C and Luther, William J., How Does a Well-functioning Gold Standard Function? (August 15, 2021). AIER Public Policy Working Paper No. 2021-07, Available at SSRN: https://ssrn.com/abstract=3957510 or http://dx.doi.org/10.2139/ssrn.3957510

Peter C Earle

affiliation not provided to SSRN

William J. Luther (Contact Author)

Florida Atlantic University ( email )

777 Glades Road
Boca Raton, FL 33431
United States

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

American Institute for Economic Research ( email )

PO Box 1000
Great Barrington, MA 01230
United States

HOME PAGE: http://www.aier.org/staff/william-j-luther

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