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Irving Fisher and Price‐Level Targeting in Austria: Was Silver the Answer?
Author(s) -
BURDEKIN RICHARD C.K.,
MITCHENER KRIS JAMES,
WEIDENMIER MARC D.
Publication year - 2012
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2012.00508.x
Subject(s) - economics , purchasing power , liberian dollar , inflation (cosmology) , us dollar , financial economics , commodity , monetary economics , price of stability , price level , econometrics , keynesian economics , monetary policy , exchange rate , market economy , physics , finance , theoretical physics
The question of price level versus inflation targeting remains controversial. Disagreement concerns not so much the desirability of price stability but rather the means of achieving it. Irving Fisher argued for a commodity dollar standard where the purchasing power of money was fixed by indexing it to a basket of commodities. We show that movements in the price of silver closely track the movements in overall prices during the classical gold standard era. The one‐to‐one relationship between paper and silver bonds suggests that a simple “silver rule” could have sufficed to fix the purchasing power of money.