DP347 The Gold Standard Since Alec Ford

Author(s): Barry Eichengreen
Publication Date: November 1989
Keyword(s): Credibility, Gold Standard, International Cooperation
JEL(s): 430
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=347

This paper surveys studies of the classical Gold Standard published subsequent to Alec Ford's The Gold Standard 1880-1914: Britain and Argentina in 1962. Contributions tend either to emphasize stock equilibrium in money markets or stock-flow interactions in bond markets. The paper then addresses how the Gold Standard worked. A key element of my explanation for the stability of the Gold Standard is the credibility of the official commitment to gold. Knowing that policy-makers would intervene in defence of the Gold Standard, markets responded in the same direction in anticipation of official action. Hence the need for actual intervention was minimized. Credibility derived from the fact that the commitment to the Gold Standard was international: central banks like the Bank of England could rely on foreign assistance in times of exceptional stress. Again, the need for actual assistance was minimized because the commitment to offer it was fully credible.