Gibson's Paradox and Policy Regimes: A Comparison of the Experience in the US, UK and Italy.

This paper compares the behavior of long-term interest rates and prices in Italy, the United Kingdom and the United States, and seeks to shed light into what has become known as the 'Gibson paradox.' The authors compare the various theoretical explanations for the observed positive correlation of interest rates and prices in the United States and the United Kingdom. Using both regression and frequency domain techniques, they demonstrate that there is little evidence for the occurrence of the paradox in the case of Italy. The key conclusion of the paper is that the comparative evidence from these three countries supports a gold standard interpretation of the paradox. Copyright 1996 by Scottish Economic Society.