TY  - JOUR
AU  - Chernyshoff,Natalia
AU  - Jacks,David S.
AU  - Taylor,Alan M.
TI  - Stuck on Gold: Real Exchange Rate Volatility and the Rise and Fall of the Gold Standard
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11795
PY  - 2005
Y2  - November 2005
UR  - http://www.nber.org/papers/w11795
L1  - http://www.nber.org/papers/w11795.pdf
N1  - Author contact info:
Natalia Chernyshoff

David S. Jacks
Department of Economics
Simon Fraser University
8888 University Drive
Burnaby, BC V5A 1S6
CANADA
Tel: 778/782-5392
Fax: 778/782-5944
E-Mail: dsjacks@gmail.com

Alan M. Taylor
Department of Economics
University of Virginia
Monroe Hall
Charlottesville, VA 22903
Fax: (434) 982-2904
E-Mail: alan.m.taylor@virginia.edu
AB  - 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.
ER  -