Scribd
Upload
96 views

Assignment IFM

The gold standard served as a monetary rule for many countries in the 19th century. Under this rule, countries fixed the price of their currency in terms of gold, maintaining a fixed exchange rate between currencies. This represented a commitment to stable monetary policies. However, the gold standard was also a contingent rule that allowed for the suspension of gold convertibility during wartime emergencies, with the understanding that convertibility would resume after the emergency ended. The international dimension of the gold standard rule meant there were no restrictions on trading gold or coin between countries on the standard.

Uploaded by

Vijay Kumar Vasam
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
96 views

Assignment IFM

The gold standard served as a monetary rule for many countries in the 19th century. Under this rule, countries fixed the price of their currency in terms of gold, maintaining a fixed exchange rate between currencies. This represented a commitment to stable monetary policies. However, the gold standard was also a contingent rule that allowed for the suspension of gold convertibility during wartime emergencies, with the understanding that convertibility would resume after the emergency ended. The international dimension of the gold standard rule meant there were no restrictions on trading gold or coin between countries on the standard.

Uploaded by

Vijay Kumar Vasam
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

A Research paper on Gold standard

Gold standard as a Rule

The gold standard has long been viewed as a form of constraint over monetary policy actions
as a form of monetary rule.
This paper the survey is on history of the gold standard (or to be more accurate the specific
standard ) treated as a rule. The approach to gold standard history posits that adherence to the
fixed price of specie, which characterized all convertible metallic regimes including the gold
standard, served as a credible commitment mechanism to monetary and fiscal policies that
otherwise would be the time inconsistent. On this basis, adherence to the specie standard rule
enabled many countries to avoid the problems of high inflation and stagflation that troubled
the late 20th century.
The gold standard that prevailed in the 19th century was a contingent rule. Under this rule
gold can be convertibility could be suspended in the event of all well understood,
exogenously produced emergency such as war , on understanding that after emergency had
safely passed convertibility would be restored at the original party.
So, according to the view the core countries of gold standard like – Britain, France, the
united states and Germany as well western European countries and British Dominions-
adhered strictly to convertibility rules in the period from 1880 to 1914. Some countries didn’t
joined, others joined it when conditions are favourable to them.
Before 1880, most countries were on a form of specie standard, either bimetallism or silver
or gold monometallism. In this paper they found the bimetallic standards that many countries
followed were a variant of the gold-standard rule, since it is convertibility that defines the
rule.
The Bretton woods international Monetary System can be regarded as a distant relative of the
classical gold standard in that the centre country.

The Gold Standards As a Contingent Rule


The essence of the gold standard was each country would define the price of gold in terms of
its currency and keep the price fixed. This means defining a gold coin as fixed weight of
gold called, the operational procedure applies to a pure gold coin standard, the standard
prevailed in the 19th century was a mixed standard containing both fiduciary money and gold
coins.
Most countries, until the third quarter of the 19 th century, maintained bimetallic systems using
gold and silver at a fixed ratio.
The main point of this research paper is that the gold standard represented such a
commitment mechanism. However operationally the rule is to suspend the gold standard
duration of a war plus a delay period. In all periods with no such emergency, the gold
standard is maintained unconditionally. This policy is fully understood and anticipated by the
public.
An International Rule
The gold standard rule also has an international dimension. Under the rule there would be no
restriction on the nationality of individuals who presented bullion to the mint to be coined or
who exported coin or bullion to foreign countries. Every country following the rule fixed the
price of its currency in gold, this created fixed exchange rates, linking all countries on the
same standard.
Bretton woods System
The Bretton woods international monetary system can also be viewed with in the context of
the specie standard rule, although it is a distant variant of the original specie standard,
Under the Bretton woods, only united states, as central reserve country and provider of the
nominal anchor, was required to peg its currency to gold.
The system was successful as long as the united states maintained its commitment to
convertibility.

You might also like