A Simple Model of the Gold Standard

This paper presents a model of the gold standard in which technology and preferences are modelled explicitly, and account is taken of both the durability of gold and the exhaustibility of gold ore. We examine the steady state and its associated dynamics, and show how the steady-state price level responds to changes in exogenous factors. Provided we have an interior solution with unmined gold in the steady state, this price level rises with technological progress in gold mining, and falls with increases in real income and the discount rate. However, the steady-state price level behaves somewhat differently if we have a corner solution