Philly Fed researchers publish paper on the Gold Standard

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Long-run price stability could be a key feature of the gold standard, researchers with the Federal Reserve Bank of Philadelphia find.

In their working paper, published in February, Jesús Fernández-Villaverde and Daniel Sanches explore how the gold standard would operate as a monetary framework in a hypothetical small open economy ...

Switch to gold standard could stabilise prices – Philadelphia Fed research - Central Banking

Hypothetical return to monetary system would only lead to short-term price movements, study finds

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Here's the paper:

We present a micro-founded monetary model of a small open economy to examine the behavior of money, prices, and output under the gold standard. In particular, we formally analyze Hume’s celebrated price-specie flow mechanism. Our framework incorporates the influence of international trade on the money supply in the Home country through gold flows. In the short run, a positive correlation exists between the quantity of money and the price level. Additionally, we demonstrate that money is non-neutral during the transition to the steady state, which has implications for welfare. While the gold standard exposes the Home country to short-term fluctuations in money, prices, and output caused by external shocks, it ensures long-term price stability as the quantity of money and prices only temporarily deviate from their steady-state levels. We discuss the importance of policy coordination for achieving efficiency under the gold standard and consider the role of fiat money in this environment. We also develop a version of the model with two large economies.

Price-Level Determination Under the Gold Standard

We present a micro-founded monetary model of a small open economy to examine the behavior of money, prices, and output under the gold standard. In particular, w

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