How Does a Well-functioning Gold Standard Function?
14 Pages Posted: 8 Nov 2021
Date Written: August 15, 2021
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: Suggested Citation