The Gold Standard as a Rule

In this paper, we show that the monetary rule followed by a number of key countries, especially England and to a lesser extent the U. S., before 1914 represented a commitment technology preventing the monetary authorities from changing planned future policy. The experiences of these major countries suggest that the gold standard was intended as a contingent rule. By that, we mean, that the authorities could temporarily abandon the fixed price of gold during a wartime emergency on the understanding that convertibility at the original price of gold would be restored when the emergency passed. The experiences of other countries, however, suggest that the gold standard rule was often viewed more as a desirable goal than an operational constraint.