A model of the classical gold standard with depletion |
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Authors: | Michael David Bordo Richard Wayne Ellson |
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Institution: | University of South Carolina, Columbia, SC 29208, USA |
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Abstract: | The operation and properties of the classical gold standard are well recognized. However, one aspect that has not been dealt with is that gold has the characteristics of a durable, but depletable resource. In this paper, we compare the simple classical model of the gold standard with a model of the gold standard that incorporates the durable, depletable nature of gold. Using numerical simulation techniques, we demonstrate an inescapable tendency to long-run deflation when account is taken of the resource constraint. These results are consistent, with and without technological progress and variable real rates of return. |
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