15-Be 8 Doe 2 wo wow deodoy 296 2851 "Ie WIE D0 suena 7 da! sh pore | joes sikaltd 249 per Turuaredeg Alnsres| Se “eeemApY o1WONORT Jo poune ain ‘pRog =| 5 fo 52 eatuey Ja Asziauow 'sp ua uon> S503 eu Butsnpss Aq pus votsued ue Rurpiacid Ao og ArmNQeNS soud ut pro# Jo 3 -uoy *pe2puy 910g pusog salieay pur syndyy GUVGNVLS 0109 BBL graydey verselee198 oweraay neronss In considering the case for & return to some form of gold standaré three tmportant questions must be answerea, First. what tyne o standard shoula we return ta” Second, ané more fundement can and what cannot a gold standard do to maintain overall 2 nomic stability? An answer to this question woula involve under, standing both the theory of the gold standard and evidence on the actual performance of the economy undet.vanous forms of the gold standard in the past. Third, would returning to some form of a gold standard be a feasible option for the future? In this paper, we attempt to provide answers to these questions The first section presents a onef classification of types of gold stan, dards (and other monetary standards). The second section summa, nats the theory of the gold standard as a form of commodity money, as a national monstary standard, and as an intemauional monetary standard. The third section discusses the operation of 2 managed gold Standard—the system that nas prevailed “over much of the period since the Napoleonic Wars, The fourth seonon presents a bref chro- nology of the gold standard from 1821 ta 1971. The fifth presents empincal evidence for the economies of the United States and the United Kingdom on the price and output stabilization properties of the classical gold standard compared to those of “managed fiducrare money.” The sixth examines some of the issues connected with ¢ possible return to golé: Finally, the seventh section presents + bnef Conclusion assessing'the costs and benefits of the gold standerd TYPES OF GOLD STANDARDS We can discuss a number of vanants of the gold standard in us long history. Unger 2 gold standard, of whatever type, the monetary authonty must maintain a fixed once of gold by purchase and sale That ence must rule not only in transactions by the monetary author ity, but also in market transactions in which prvate participants ar: free to engage. ‘The types of gold standard are: 1. A gold coun standara with 100 percent gold cover for nongolé money and no central bank 7A gold coun stanaard with fractional reserves held by the gover ment against ats note issues and by commercial benks sgzinst The Gola Standera.—. 1.99 their Cenosits. with or without 2 central bank, with convertibility for all noicers of nongold money in golo coin. A gold bullion standard with fractional reserves against the cen- tral bank's monetary base (currency plus bank reserves), with no. gold coin circulation, and with convertibility for all holders of nongold money limited to large amounts, 4A gold exchange standard with fractional reserves and with a central bank tied to a currency of 2 center country that has a g01d-coin or gold-bullion stanéara, ° The Bretton Woods dollar-gold exchange standard, with convert bility limuted to official anstitutson dollar assets “for the settie- ‘ment Of intemational balances or for other legitimate monetary purposes." ‘The first type of gold standard existed only in premodern times; 4&5 we argue below, the classical gold standard that held sway before 1914 wes 2 combination of types 2 to 4 and is frequently referred to 258 managed gold standard.* ‘These vanous gold standards must be contrasted wath the type of standard in use today" an inconvertible paper standard, with 2 cen- wal bank free to exereue discretion of else subject to 2 prescribea rule with respect to the quantity of money outstanding? ‘THE THEORY OF THE GOLD STANDARD: THE STYLIZED FACTS og Economists from Cant the gold standard wai jon to Keynes have formulated a theory of (nree dimensions: the gold standard as a com= gold standard and 10 all the other 32 id standars, in "Res! nd Pseudo Gold Stsndars." Journal ef Lew and Feo. romics (4 (Occober 1961). pp. 68-79. S. Over the history ofthe gold standard, numerous wnters have proposed the tse of for st commodity standards based on commodities ethes than gold, with converdb elders of noncommodity mene’ nthe designated taster of commotibes, 5, The recent oroposs! by Robert E, Wentmuo, “Restoring the Gold Cettii “dom Econonic Comite US. Congres: Study (1881), fe 1 bai to che mone! not rely = go“Aamarns 90ud uns-Suo} eansuta pinom STL, siaajJ2 ndyno ayp Sutsvoyines smi ‘asn AeyauoU 0} ArzrouoWUON oxy pyo8 40j puewap axp ur ayrys ® 02 PES! O82 PINOM PIOB Jo samod Aunseysund oy) ur aseorom |eTMR ayy “jaxa] FeNAN ma 0} saad usnis! 0} pua) Ajaieunyn pinom sty pur “indino pjoS passoz2.ut SucSeinooue ‘votLsnpord plod Jo JAMNR s0ss0U1 pjnom 402 208 pjoBuou au ap soouies uz spoo$ Jo soué an aunsop © yérosienueD “3 vital shun “ain Aaereuounoe’O) AszyoUOW! 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