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Inflation-Proof Currency? The Feasibility of Variable Commodity Standards

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  • Schnadt, Norbert
  • Whittaker, John

Abstract

Under a proposal by Robert L. Greenfield and Leland B. Yeager (1989), the value of currency is tied to the value of a defined basket of goods by indirect convertibility: the note-issuing bank offers to redeem its currency for sufficient gold to buy the basket in the market. The authors find that this arrangement cannot be applied to the currency that is the medium of account for quoting prices of goods and that it would imply unlimited change in the gold price when the price of the basket deviates from unity. A feedback rule with slower price adjustment may, however, be feasible. Copyright 1993 by Ohio State University Press.

Suggested Citation

  • Schnadt, Norbert & Whittaker, John, 1993. "Inflation-Proof Currency? The Feasibility of Variable Commodity Standards," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 214-221, May.
    • Handle: RePEc:mcb:jmoncb:v:25:y:1993:i:2:p:214-21
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    Cited by:

    1. Bennett T. McCallum, 2003. "Monetary Policy in Economies with Little or No Money," NBER Working Papers 9838, National Bureau of Economic Research, Inc.
    2. David Cronin, 2017. "Indirect Convertibility, Equity-Based Banking and Financial Stability," Economic Affairs, Wiley Blackwell, vol. 37(3), pages 357-364, October.
    3. Sumner Scott, 2006. "Let a Thousand Models Bloom: The Advantages of Making the FOMC a Truly 'Open Market'," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-27, October.
    4. J. S. Ferris & J. A. Galbraith, 2003. "Indirect convertibility as a money rule for inflation targeting," Applied Financial Economics, Taylor & Francis Journals, vol. 13(10), pages 753-761.
    5. James A. Dorn, 2010. "Editor's Note," Cato Journal, Cato Journal, Cato Institute, vol. 30(3), Fall.
    6. J. Stephen Ferris & J.A. Galbraith, 2000. "Indirect Convertibility, Inflation Targeting, and Monetary Policy Rules," Carleton Economic Papers 00-10, Carleton University, Department of Economics.
    7. repec:dau:papers:123456789/11496 is not listed on IDEAS
    8. Colin Rogers & Thomas K. Rymes, 1998. "Indirect Convertibility and Quasi-Futures Contracts: Two Non-Operational Schemes for Automatic Stabilisation of the Price Level?," School of Economics and Public Policy Working Papers 1998-17, University of Adelaide, School of Economics and Public Policy.

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